As of 1 July 2026, it has become easier for new and smaller companies to offer employee shares as part of the pay package, provided the other conditions are met. Under the new rules in section 7 P of the Tax Assessment Act, the previous cap of 50% of the employee's annual salary has been removed, and more companies can now use the scheme.
As an employee, section 7 P can be attractive to you because taxation typically only arises when the shares are sold, and because the gain is taxed as share income at 27% or 42%, rather than as personal income (salary income).
What are employee shares?
Employee shares are shares, other equity interests, or purchase or subscription rights that an employee receives as part of their pay package. The employee is therefore granted shares without having to pay the full market value.
Employee shares are often used by companies that want to attract and retain employees. For the employee, the scheme can also provide a share in the increase in value that the employee helps to create in the company, together with favorable taxation.
For tax purposes, there are several sets of rules governing the taxation of employee shares. What is special about section 7 P is that taxation can be deferred until the shares are sold.
Changes as of 1 July 2026
Act No. 1781 of 29 December 2025 amended section 7 P of the Tax Assessment Act. The amendments entered into force on 1 July 2026 and apply to agreements on the grant of shares, purchase rights or subscription rights entered into on or after that date.
Agreements entered into before 1 July 2026 cannot subsequently be brought under the relaxed rules, even if the share-based remuneration has not yet been earned. Companies that have already entered into agreements on the grant of share-based remuneration therefore cannot make use of these relaxed rules, regardless of whether the remuneration has yet been earned by the employee.
The previous 50% salary cap has been removed
Under the previous rules, employee shares in new and smaller companies could, as a general rule, amount to up to 50% of the employee's annual salary. This cap has now been removed.
Instead, a requirement has been introduced that the employee's taxable annual salary at the time the agreement is entered into must be at least DKK 265.300 (2026 level).
More companies can now use the scheme
The scheme is no longer reserved for very small start-ups. The limit on the number of employees has been raised from 50 to 150. At the same time, the limit on the company's net turnover or balance sheet total has been raised from DKK 15 million to DKK 200 million. Finally, the limit on how long the company may have been active in a market has been raised from 5 to 10 years.
This means the scheme can now also be used by more established growth companies that were previously too large, or had existed for too long, to be covered.
Benefit for smaller companies
The new rules are of particular interest to start-ups and growth companies at the stage where the company needs skilled employees but may not yet be able to compete with larger companies on salary. Employee shares can be a way of making the overall pay package more attractive.
A company can offer an employee a regular salary combined with shares or options. This can be an important tool for attracting and retaining employees.
For the employee, this can be an opportunity to achieve a financial gain if the company later develops positively and the value of the shares increases. The employee thereby shares in a future increase in the value of the company.
Benefit for the employee: taxation is deferred
The main tax advantage is that the employee is not taxed when the shares or rights are granted. Instead, taxation is deferred until the shares are sold. At that point, the gain is taxed as share income rather than as ordinary salary income. This can matter a great deal to an employee who receives shares of high value and would otherwise have to pay tax already at the time of grant.
Relaxation of the valuation requirement
Another significant change is that, under the new rules, companies no longer have to state the value of the remuneration, which was previously a requirement for applying the section 7 P rules.
Valuing unlisted shares, options and warrants can be difficult, especially for companies in an early growth phase. It can be both time-consuming and costly and can create uncertainty about which value should be used. The new rules therefore make the scheme easier to apply in practice.
An employee share agreement is not automatically covered by section 7 P of the Tax Assessment Act
Not all employee shares are automatically taxed under section 7 P simply because the parties call them employee shares. As an employee, it is therefore a good idea to read your agreement carefully to avoid costly mistakes, and to check your tax assessment notice to make sure the shares are registered correctly. In addition, the conditions for applying section 7 P of the Tax Assessment Act must be met.
New rules – but advice is still needed
The new rules relax the requirements for smaller companies, and for employees the new rules are more attractive. However, they do not make employee shares uncomplicated. The rules are complex, and mistakes can have significant tax consequences.
Contact us for advice:
At SkatteInform, we can help review your agreement and advise on the taxation of employee shares, purchase rights and subscription rights. We also offer help with the calculations and the tax treatment on a later sale.
Although the new rules represent a relaxation, a number of conditions must still be met, and the formalities must be in place, before an agreement on employee shares is actually tax-exempt under section 7 P. A mistake can mean that the Danish Tax Agency later disallows the tax exemption – which can become an expensive surprise for both the company and the employee.
Among other things, we can help you to:
Assess whether the employer meets the conditions
Calculate the employee's annual salary correctly, so you know whether the salary requirement of DKK 265.300 (2026 level) is met
Calculate the tax consequences of the share-based remuneration agreement, including other possible share-based remuneration schemes
Prepare or review the share-based remuneration agreement itself, so that it meets the formal requirements of section 7 P
Clarify whether reporting to the Danish Tax Agency is required
Advise the employees who receive the shares on the tax consequences when the shares are later sold
Contact us for a no-obligation conversation about how to get off to a good start with employee shares in your company.
Source references: the bill as adopted:
https://www.retsinformation.dk/eli/ft/202523L00004
The Danish Tax Agency's legal guide has not yet been updated at the time of publication of this article.
This article has been written as general information and cannot replace individual advice. We accept no liability for actions taken on the basis of this article without prior individual advice. Likewise, we accept no liability for any errors or omissions.
