Stock Options in Brazil - how are they taxed?

The original version of this article is written in Portuguese and is also available on this blog. We highly recommend reading the original, if possible.

In recent years, Stock Options have become common in large companies, especially in the technology and startup sectors.

Companies like Meta, Apple, Tesla, Google, and Salesforce already use this compensation model in countries like the United States and the United Kingdom. Recently, in Brazil, companies like Nubank, MRV, iFood, and Wellhub (formerly Gympass) have also adopted the stock option model.

This benefit allows employees to purchase company shares at a predetermined price, which can become a profitable opportunity if the shares are appreciated in the market. However, the way this benefit is treated for tax purposes has generated discussions in Brazil, particularly regarding the collection of taxes. In recent months, important rulings from the Superior Tribunal de Justiça (STJ) under Repetitive Appeal - Topic 1226, statements from the Conselho Administrativo de Recursos Fiscais (CARF), and the Projeto de Lei n. 2724/2022 have brought new directions on the matter.

Let’s understand what all this means and how it may affect individuals who receive Stock Options.

• What are Stock Options?

Stock Options are a type of benefit, companies offer to their employees, granting them the right to buy company shares at a predetermined price (usually lower than market value) on a future date. If the company’s shares increase in value, the employee can profit by selling those shares at a higher price.

This mechanism is used to encourage employees to stay with the company and align their interests with the company’s success, as the company's growth would lead to an increase in share value, benefiting the employee.

• What did the STJ rule about Stock Options?

In September 2024, the STJ made an important ruling through Repetitive Appeal - Topic 1226 on the nature and taxation of Stock Options.

The key question was: should Stock Options be treated as compensation (salary) and, therefore, subject to labor charges such as social security (INSS) and severance (FGTS), or as an investment made by the employee?

The STJ ruled that Stock Options are not compensation, i.e., they have a commercial nature, provided they meet two main requirements:

• Voluntariness: The employee must have the option to participate in the Stock Option program or not.

• Economic risk: There must be a risk of loss for the employee. In other words, if the shares are not appreciated, the employee may not profit or may even lose money.

  
  

In the ruling, the following thesis was established:

In the Stock Option Plan regime (Article 168, §3, of Law 6,404/1976), because it is of a commercial nature, personal income tax (IRPF) does not apply when shares are acquired from the granting company, as there is no increase in wealth for the acquiring employee.

However, personal income tax (IRPF) will apply when the individual resells the acquired shares and realizes a capital gain.

This decision is important because, by considering Stock Options as an investment rather than salary, employees do not have to face labor charges deducted from their payroll based on the value received through this benefit. This aligns with the jurisprudence adopted by the Tribunal Superior do Trabalho (TST).

In this scenario, the Procuradoria Nacional da Fazenda appeal, which defended the remunerative nature of the Stock Option program due to the work performed, was not upheld.

• What has CARF said about Stock Options?

The Conselho Administrativo de Recursos Fiscais (CARF) is an administrative court that adjudicates cases related to tax payments. Thus, this court has also issued rulings on the taxation of Stock Options. However, its positions have sometimes differed, creating uncertainty for companies and employees.

In several decisions, CARF has considered Stock Options as part of employees' remuneration, which would imply the incidence of taxes such as INSS and income tax withheld at the source (IRRF). The argument is that, in some cases, Stock Options are part of a remuneration package and are not considered a real risk investment.

However, despite the STJ’s decision having a binding effect on CARF, the council is still waiting for the decision to become final and unappealable before adopting more precise measures.

• What is Projeto de Lei 2724/2022?

The Projeto de Lei n. 2724/2022 (PL 2724/22) also aims to bring greater clarity and legal certainty regarding the taxation of Stock Options in Brazil. The bill, which is still under discussion in Congress, seeks to regulate how this benefit should be treated for labor and tax purposes.

Some of the key proposals in PL 2724/2022 include:

• Defining that Stock Options, when configured as a long-term incentive instrument, should not be treated as part of remuneration for labor purposes (INSS, FGTS) or for IRRF taxation.

• Establishing clear rules regarding the formalization and structure of Stock Option programs to ensure they are transparent and voluntary, protecting both the company and employees.

• Rules for the treatment of income tax on capital gains when the employee decides to sell the acquired shares.

This project aims to end the legal uncertainty that currently exists regarding how Stock Options should be treated, especially after conflicting decisions between CARF and the STJ.

• How do these changes affect you as an individual?

If you work for a company that offers Stock Options or are considering participating in such a program, the recent changes bring more clarity about how your earnings will be taxed.

• Labor charges: With the STJ decision and possibly the approval of PL 2724/2022, Stock Options will not be treated as salary, provided they are voluntary and carry economic risk. This means you will not need to pay INSS or FGTS on the value of the acquired shares.

  
  

• Income tax: Although there will be no labor charges, the profits from selling the shares will still be taxed as capital gains, with rates ranging from 15% to 22.5%, depending on the amount of profit. In other words, when you sell the shares, you will have to pay income tax on the profit earned.

  
  

• Legal certainty: With PL 2724/2022 in progress, it is expected that the rules will become clearer, giving both employees and companies greater security when joining Stock Option programs, without the risk of divergent tax interpretations.

Conclusion

The STJ ruling, the discussions at CARF, and Bill 2724/2022 are important steps in bringing more clarity and fairness to the taxation of Stock Options in Brazil. However, there is still some instability, and caution is needed for the next steps, as the STJ decision has not yet become final, nor has PL 2724/2022 been approved.

Thus, the Mosaico Tax team will be closely monitoring the main updates on this topic and assisting its clients with proper tax planning.

If you have any questions about Stock Options, income tax, or final exit declarations, schedule a consultation with one of our specialists.

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It is worth noting that the information presented in this article is for informational and analytical purposes only and does not constitute technical or professional advice. This company is not responsible for any decisions made based on the content provided here.