Introduction
⚠️ The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️
A more comprehensive set of information for this country and work relationship is available on Easop.
If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡
Regular employee
You can grant non-qualified stock options (NSO) to direct employees in Brazil.
There are no legal obstacles but the tax treatment of stock options is not clear because there’s no specific legislation dealing with stock options and equity awards in general.
In a nutshell, what does taxation look like?
There’s no specific legislation regarding stock options, so the gains realized could be considered as either income similar to a business income or something closer to a capital income.
Even though taxation isn’t clear, there shouldn’t be any taxation at the time of grant.
The taxation at the time of exercise is unclear and there are 2 possibilities depending on how the tax authorities view the relationship between the employer and the grantee.
Regardless of which position is taken, there would be a taxation at the time of sale, either on the difference between the sale price and the fair market value (FMV) of the shares at the time of exercise, or on the difference between the sale price and the exercise price. In both cases, the sale would be subject to capital gains tax.
Employee via EoR
You can grant non-qualified stock options (NSO) to EoR employees in Brazil.
There are no legal obstacles but the tax treatment of stock options offered to employees employed via an Employer of Record (EoR) is not clear because there’s no specific legislation dealing with stock options and equity awards in general.
In a nutshell, what does taxation look like?
There’s no specific legislation regarding stock options, so the gains realized could be considered as either income similar to a business income or something closer to a capital income.
Even though taxation isn’t clear, there shouldn’t be any taxation at the time of grant.
The taxation at the time of exercise is unclear and there are 2 possibilities depending on how the tax authorities view the relationship between the employer and the grantee.
Regardless of which position is taken, there would be a taxation at the time of sale, either on the difference between the sale price and the fair market value (FMV) of the shares at the time of exercise, or on the difference between the sale price and the exercise price. In both cases, the sale would be subject to capital gains tax.
Contractor
You can grant non-qualified stock options (NSO) to Brazilian contractors. There are no legal obstacles but the tax treatment of stock options offered to contractors is not clear.
Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that can go with it). This will never be the only factor though, what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).
In a nutshell, what does taxation look like?
The taxation of stock options in Brazil is unclear. It’s unclear for employees, and by extension also for contractors.
There’s no specific legislation regarding stock options, so the gains realized could be considered as either income similar to a business income or something closer to a capital income.
In principle, the grantee should only need to pay taxes when they sell the underlying shares. However, there is a chance local tax authorities might require the grantee to pay taxes on exercise as well, depending on how the tax authorities see the relationship between the issuing entity and the contractor.
