The taxation of share schemes
("Mitarbeiterbeteiligungsprogramme") as an instrument for
recruitment and development of employees is, in part, regarded as
problematic in Germany. Depending on the structure of the share
scheme, especially taxable dry income needs to be avoided. In 2021,
a deferral of income tax (sec. 19a Income Tax Act) was introduced
for employees of small and medium-sized companies. According to
that privilege, under certain conditions, employees are not liable
to immediately pay income tax when they acquire shares at a
discounted rate. Although this regulation has solved some of the
issues arising from dry income, in practice there are still dry
income situations, e.g., in the case of leaving employees, who
might still face dry income situations. On April 12, 2023, the
Federal Ministry of Finance ("MOF") published a first
draft of the Future Financing Act ("Draft Act"), which
also includes changes—among others—for the Income Tax
Act. The Draft Act
