Finland 2026: What the New Tax Rules Mean for Equity Incentive Schemes (unlisted Companies), a Practical Guide for Founders, Investors and HR

Last updated: 15 May 2026

The Finnish Government’s mid-term budget announcement on 22–23 April 2026 introduced the most significant reform of equity incentive schemes in Finland for unlisted companies in over a decade, proposing to defer the taxation of employee stock options from the point of exercise to the point of disposal. For founders, investors, and HR directors who have long struggled with the liquidity mismatch created by taxation at exercise, where employees owed tax on paper gains they could not yet realise, the proposed shift represents a fundamental redesign of how equity compensation for unlisted companies will work.

This guide explains the core changes, walks through the practical tax mechanics with worked examples, and provides an operational compliance checklist so that every stakeholder can act now while the legislative process continues.

Executive Summary: What Changed and What to Do Next

During the spending-limits session of 22–23 April 2026, the Finnish Government outlined its intention to reform the taxation of employee stock options in unlisted companies. The key announcements, confirmed by multiple law-firm analyses published between 23 and 28 April 2026, can be summarised as follows:

• Deferral of tax event. The Government proposes revising employee stock option rules so that taxation is deferred until the disposal of the shares subscribed through the option, rather than at the time of exercise.
• Scope: unlisted companies only. The proposed changes specifically target equity incentive schemes in unlisted companies, aligning Finland more closely with international norms and addressing the “dry income” problem that has hindered startup stock options in Finland for years.
• Employee share offerings. Changes are also proposed for the tax treatment of employee share offerings (direct share awards at a discount), with the intention to postpone the time when the employee share benefit is taxed.
• New reporting obligations expected. Industry observers expect that employers will face new record-keeping and reporting requirements when the tax event shifts to disposal, though detailed implementing rules are still pending.
• Legislative timeline. The proposals are government-level policy decisions; a formal government bill is expected to follow in autumn 2026 or early 2027, with the new rules likely taking effect from 1 January 2027 or the following tax year.

Three immediate actions for founders, investors and HR:

1. Audit existing plans. Review all current option agreements, share award plans, and shareholder agreements for clauses that reference “tax at exercise” or contain indemnity language tied to the current regime.
2. Pause new grants (or add conditionality). Consider adding a regulatory-change clause to any new equity grants issued before the final legislation is enacted.
3. Brief your board and investors. Update cap-table models and investor-side tax planning to reflect the proposed deferral, the change may affect dilution timing, secondary transfer mechanics, and exit planning.

Background: Pre-2026 Treatment of Equity Incentive Schemes in Unlisted Companies

Typical Instruments: Options, Share Awards, and Phantom Plans

Finnish unlisted companies have traditionally used three main instruments for equity compensation: stock options (the most common for startups), direct share awards or employee share offerings at a discount to fair market value, and synthetic or phantom share arrangements that deliver a cash payment linked to share-price performance. Each instrument carried different tax consequences, but all shared one critical feature: the taxable event typically arose before the employee could convert the benefit into cash.

Pre-2026 Taxable Events and Valuation Practices

Under the rules in force before the 2026 reform announcement, the taxation of share options in Finland was governed by Section 66 of the Finnish Income Tax Act (TVL). The employee stock option benefit, calculated as the difference between the fair market value of the underlying shares and the exercise price paid, was treated as earned income and taxed at the point the option was exercised. Progressive income tax rates (up to approximately 55–57% at the highest marginal rate, including municipal and health-insurance contributions) applied to this benefit.

For unlisted companies, this created a well-documented problem: employees faced a tax bill on shares that had no liquid market. The company or the Finnish Tax Administration would determine a fair market value, typically using a formula-based or comparable-transaction method. Employees had no certainty that they could sell the shares at the assessed value, and many early-stage startup employees found themselves owing tax on gains they could not monetise. This “dry income” problem was widely regarded as a competitive disadvantage for Finland’s startup ecosystem, discouraging the use of employee stock options in Finland compared to jurisdictions with more favourable deferral regimes.

Employee share offerings, where shares are offered at a discount, were subject to similar timing: the taxable benefit arose when the shares were subscribed, with the discount taxed as earned income. The combined effect suppressed the attractiveness of equity incentive schemes in Finland, particularly for early-stage companies unable to facilitate secondary sales.

The 2026 Changes: What the Government Proposes

The Finnish Government’s framework-session decision of 22–23 April 2026 signals a fundamental shift in the taxation of equity incentive schemes for unlisted companies. According to the legal alerts published by Borenius on 23 April 2026 and Roschier on 28 April 2026, the Government proposes that the employee stock option benefit will no longer be taxed at the time of exercise. Instead, taxation will be deferred until the employee disposes of the shares acquired through the option.

The core mechanics of the proposed reform, based on published government intentions and law-firm commentary, include:

• Tax deferral to disposal. The entire option benefit (the difference between FMV at exercise and the exercise price) will be taxed only when the employee sells, transfers, or otherwise disposes of the shares. This eliminates the liquidity mismatch that characterised the old regime.
• Treatment as earned income. Early indications suggest the deferred benefit will still be classified as earned income (subject to progressive tax rates) rather than capital gains income (taxed at a flat 30% or 34% on amounts exceeding EUR 30,000). The precise classification in the final bill will be decisive for the total tax burden.
• Employee share offerings. The Government’s intention extends to employee share offerings of unlisted companies: the discount benefit will similarly be taxed at the point of disposal rather than at subscription.
• Employer reporting. The likely practical effect will be new employer record-keeping obligations, companies will need to track exercise dates, exercise prices, and the number of shares acquired, then report (or assist in reporting) at the time of disposal.

Timeline of Legislative Steps

Note: the dates from autumn 2026 onward are projections based on standard Finnish legislative timelines and should be monitored as the process evolves.

Practical Tax Mechanics: How the New Treatment Affects Founders, Employees and Investors

The proposed reform to equity incentive schemes in Finland will affect each stakeholder group differently. Below, we break down the impact by role and illustrate the tax changes with worked examples based on common startup stock options in Finland.

For employees: The headline benefit is obvious, no tax is due at exercise, removing the need to find cash (or sell other assets) to fund a tax bill on illiquid shares. However, if the deferred benefit remains classified as earned income, the total tax rate at disposal could be significantly higher than the 30–34% capital gains rate that would apply to a “normal” share sale.

For employers: The removal of withholding at exercise simplifies payroll at the point of grant and exercise. However, companies will need robust systems to track share-based payments and report them accurately when employees eventually dispose of their shares, potentially years later.

For investors: The reform may increase the attractiveness of startup equity to talent, which supports valuations. Transfer tax on corporate shares in Finland is currently 1.5% on the purchase price, and this remains unchanged by the proposed reform. Investors planning secondary transactions or exits should account for the employee tax deferral when modelling cap-table outcomes.

For founders: Founders who hold shares directly (not through options) are generally unaffected on personal tax treatment. However, where founders also hold options or where the company has issued employee share offerings, the new rules may change the timing of deductible expenses and the company’s social-contribution obligations.

Worked Example 1, Early Employee With Options Exercised Pre-Exit

Assume an early employee at a Finnish startup receives 10,000 options with an exercise price of EUR 1.00 per share. At the time of exercise, the fair market value is EUR 5.00 per share. The employee eventually sells all shares at EUR 10.00 per share during an exit event.

The key advantage: the employee avoids the EUR 20,000 immediate tax bill and only faces taxation when cash is actually available from the sale.

Worked Example 2, Founder Rollover at Exit

A founder holds 100,000 options with a nominal exercise price of EUR 0.10 per share. The company is acquired at EUR 8.00 per share. Under the pre-2026 rules, the founder would have been taxed at exercise on the earned-income component (EUR 7.90 × 100,000 = EUR 790,000), potentially at over 55% marginal rate. Under the proposed rules, this entire amount would be deferred to the disposal event (the acquisition), at which point the founder has sale proceeds to cover the tax. The practical effect is that the founder retains working capital and avoids forced secondary sales or bridge financing to cover pre-exit tax liabilities.

Restructuring and Design Options for Equity Incentive Schemes in Finland

The 2026 tax changes create an opportunity for unlisted companies to redesign their incentive structures. Whether a company should retain, amend, or replace existing plans depends on several factors, including the stage of the company, the size of the option pool, and the expected timeline to a liquidity event.

Key alternatives and their relative merits include:

• Retain existing stock option plans and wait. If the final legislation is enacted as proposed, existing option holders will benefit from the deferral automatically (subject to transitional rules). This is the simplest approach but carries the risk that transitional provisions may not cover all existing grants.
• Amend option agreements. Add a clause acknowledging the regulatory change and confirming that the company will comply with whichever regime is in force at the relevant tax event. This provides certainty to employees and protects the company from contractual disputes.
• Switch to direct share awards. If the reform also defers taxation on employee share offerings, direct share grants at a discount may become more attractive relative to options, particularly for later-stage companies where the strike price provides less leverage.
• Phantom or synthetic shares. Companies that wish to avoid share-register complexity can use cash-settled phantom share plans. These remain taxed as earned income at the payment date and are unaffected by the proposed reform, but they avoid cap-table dilution.
• Convertible instruments. Convertible loans or SAFEs that convert at a future financing round offer another mechanism to defer both dilution and taxation. However, these carry their own legal and tax complexities.

Decision Tree for Founders and CFOs: Restructuring Incentive Plans

Use the following checklist to determine your next steps:

1. Do you have existing option grants outstanding? → If yes, review the terms for tax-event language and consider an amendment clause (see sample below).
2. Are you planning new grants before the law is enacted? → If yes, include a regulatory-change conditionality clause and consider delaying if feasible.
3. Is a liquidity event expected within 12–18 months? → If yes, the deferral may have limited impact; focus on exit-planning and cap-table modelling.
4. Do you use phantom shares or cash-settled plans? → If yes, no immediate action is needed on tax timing, but review whether switching to real equity is now more attractive.
5. Have you communicated the changes to employees? → If no, prepare a notification (see sample communication below).

Employer Reporting, Payroll and Valuation: Operational Checklist for Share-Based Payments in Finland

The shift from taxation at exercise to taxation at disposal fundamentally changes the payroll and reporting workflow for HR and finance teams managing share-based payments in Finland. Below is a step-by-step operational guide.

Payroll Obligations: Exercise vs Disposal

Operational steps for HR and finance teams:

• Update payroll software to flag option exercises as non-taxable events (once the new rules are enacted) while still recording the underlying data.
• Implement a share-register tracking system that captures exercise dates, exercise prices, number of shares acquired, and any subsequent transfers.
• Establish a process for employees to notify the company (or a designated agent) when they dispose of shares, so that the employer can meet its reporting obligations.
• Brief external payroll providers and tax advisors on the change, and request updated processing templates.
• Prepare for Finnish Tax Administration queries during the transition, maintain dual records under both the old and new regimes for overlapping periods.

Immediate Risk Checklist and Compliance Calendar

Companies with existing or planned equity incentive schemes in Finland should work through the following ten-point checklist before the end of Q3 2026:

1. Review all outstanding option agreements and identify clauses referencing tax at exercise.
2. Review employee share offering terms for discount-taxation language.
3. Audit the shareholder register and cap table for accuracy and completeness.
4. Update payroll systems to accommodate dual treatment during the transitional period.
5. Notify the board of directors and existing investors of the proposed changes and their implications for dilution modelling.
6. Update template offer letters and employment agreements to reflect the new regime.
7. Prepare an employee communication (see sample below) explaining the changes and the expected benefits.
8. Engage tax counsel to review whether transitional rules will apply to options granted before the new law takes effect.
9. Review any tag-along, drag-along, or transfer-restriction clauses in shareholder agreements that may interact with the disposal-based tax trigger.
10. Calendar the expected legislative milestones (government bill in autumn 2026; parliamentary vote in late 2026 / early 2027) and schedule follow-up reviews.

Sample Clause Bank and Template Language

Important: The following samples are provided as starting points only. They require review and adaptation by qualified Finnish legal counsel before use in any binding document.

Sample Amendment Clause for Option Agreements

“Regulatory Change Provision, Notwithstanding any other provision of this Option Agreement, in the event that the Finnish Income Tax Act or any related regulation is amended such that the taxable event for the Option Benefit is deferred to a date other than the Exercise Date, the parties agree that (a) the Company’s withholding and reporting obligations shall be determined by reference to the legislation in force at the time the taxable event occurs; (b) the Option Holder shall cooperate with the Company in providing such information as is necessary for the Company to meet its reporting obligations; and (c) these terms shall be interpreted consistently with the applicable legislation without the need for a formal amendment to this Agreement.”

Sample Communication Notice to Employees

“Dear [Employee Name], We are writing to inform you of a significant proposed change to Finnish tax law that may affect your stock options / share awards. The Finnish Government announced on 22–23 April 2026 its intention to defer the taxation of employee stock options in unlisted companies from the point of exercise to the point at which shares are sold or otherwise disposed of. If enacted as proposed, this means you would no longer face a tax liability when you exercise your options, tax would instead be payable only when you sell your shares. We are monitoring the legislative process closely and will provide further updates as the government bill progresses through Parliament.

In the meantime, please do not make any tax-planning decisions based solely on this announcement. We recommend that you consult with your personal tax advisor. If you have questions, please contact [HR Contact].

Next Steps

The proposed reform to equity incentive schemes in Finland represents a once-in-a-decade opportunity to redesign how unlisted companies attract, retain, and reward talent through equity. Founders, investors, and HR directors should act now, auditing existing plans, preparing amendment language, and updating internal processes, rather than waiting for the final legislation. Those who move early will be best positioned to offer competitive, tax-efficient equity compensation from day one of the new regime. For tailored advice on restructuring incentive plans or reviewing existing schemes, consider consulting a Finland-based legal specialist or exploring the Business practice area directory for qualified professionals.

Disclaimer: This article provides general guidance on proposed legislative changes in Finland as of May 2026. It does not constitute legal or tax advice. Readers should seek qualified local legal and tax counsel before taking any action based on the information provided.

Sources

1. Borenius, Finnish Government Introduces Changes to the Tax Rules on Equity Incentive Schemes for Unlisted Companies (23 April 2026)
2. Roschier, Government Intention to Propose Significant Changes to Tax Treatment of Stock Options and Employee Share Offerings (28 April 2026)
3. Finnish Tax Administration (Vero), Transfer Tax on Corporate Stock
4. MK-Law, Taxation of Employee Stock Options in Finland: Proposed Reform (23 April 2026)
5. KPMG Finland, Major Shift in Employee Share Issue (ESI) Rules
6. Ministry of Finance (Valtiovarainministeriö), Pay Incentive Schemes
7. Tuokko, Tax Changes in the 2026 Spending Limits Session (6 May 2026)
8. Business Finland, New Tax Credit for Clean Transition Investments (2026)
9. Legal 500, Finland Employee Incentives Guide