Employee participation programs are an important instrument for attracting and retaining qualified employees and motivating them accordingly, as the desired employees participate in the company’s success. In the course of equity participation programs, a shareholding is basically granted to the beneficiary.

From a tax point of view the question arises as to whether the employee concerned also acquires economic ownership of the shares granted if certain blocking periods in the form of a restriction on disposal are agreed with the company issuing the equity participation program.


Tax analysis of blocking periods

In the opinion of the Austrian tax authorities, a transfer of a shareholding (and thus an inflow) only occurs if the shareholding is an asset and the employee becomes the economic owner. Therefore, there is no transfer of a shareholding if the employee cannot freely dispose of the shareholding or if a sale or transfer to third parties is permanently restricted by agreements with the employer or if, from an economic point of view, the employee is only granted the right to dispose of the income from the shareholding for a certain period of time (e.g. during the term of employment). Therefore, the employee does not become the economic owner of the shareholding if, for example, the employer is granted a right of repurchase at a price agreed in advance. A pre-emptive right of the employer at the market price or a certain blocking period (up to five years) with regard to a realization of the shareholding do not in themselves speak against an economic ownership of the employee.

In this context the following example can be found in the wage tax guidelines:

An employee is granted shares free of charge on a grant date. From the grant date, the employee has voting rights and dividend rights, but may not sell the shares. From the vesting date (assumed to be a maximum of 4 years after the grant date), the employee may dispose of the shares without restriction. If the employee leaves the company before the vesting date, he loses all rights. In this context, the tax authorities assume that the inflow occurs on the grant date.

In Austrian literature, it is pointed out that in the event of a restriction on the sale of shareholding, the employee nevertheless remains the economic owner of the shareholding if the employee is entitled to at least the voting rights and dividends. In principle, a restriction on the transfer of voting rights to third parties is just as harmless as the existence of a requirement for the company’s consent in the event of a sale or pledge to third parties.

Furthermore, it is assumed that a blocking period does not postpone the time at which the shareholding is attributed to the employee if the employee merely triggers obligations to pay damages by violating the prohibition on disposal. In such cases, the employee may not freely dispose of the share until the blocking period has expired, but legally and economically he is already the owner of the share from that moment on.



Against this background, it can therefore be assumed that the agreement of time-limited blocking periods with regard to the disposal of the participation acquired under a participation program basically does not prevent the inflow through transfer of economic ownership, provided that the beneficiary is entitled to voting rights and the profit distributions. Therefore these aspects have to be analysed from a tax perspective in the course of preparing the contractual agreement.




Christoph Puchner, Managing Partner and Tax Advisor &
David Gloser, Managing Partner, Tax Advisor and Chartered Accountant from ECOVIS Austria, one of the leading tax consultants in Austria in the startup sector.