Zaměstnanecké akcie – jak fungují a jaké změny a vývoj přináší rok 2025

What are employee shares (ESOP)?

Until recently, however, Czech legislation did not recognise the ESOP concept, and companies that wanted to offer their employees a stake faced legal and tax obstacles. In practice, it was necessary to use complex contractual structures (e.g., various option agreements or virtual shares), which often did not inspire confidence – especially among foreign experts you were trying to attract.

The lawyers at ARROWS frequently encountered such makeshift solutions and know that implementing an ESOP "the Czech way" was not at all easy. Moreover, these informal procedures were tax-inefficient: employees had to pay tax and social security contributions on potential profits two or even three times, often before they had seen a single crown from the shares. It is no wonder that many talented people preferred to go where they could get similar benefits without such a burden.

Why consider employee shares?

Are you afraid that key talent will leave for competitors or go abroad? You are not alone. Until now, Czech startups have been at a disadvantage compared to foreign companies because they could not offer comparable shares on fair terms. Employee shares can change this situation. They bring a whole range of benefits for companies of all sizes:

• Employee motivation and loyalty: When you give employees the opportunity to become co-owners, you significantly increase their motivation and sense of responsibility for the company's success. An employee with shares perceives the growth in the company's value as their own victory – which increases their commitment and loyalty.

• Retaining and attracting talent: For many startups and established businesses, an ESOP is an incentive that helps attract top experts without having to immediately compete with corporate salaries. Employees see that in addition to their salary, they will also get a share of future profits, and they have a reason to stay for the long term. In a competitive environment, this can be a decisive benefit – otherwise, top experts in your field may leave for elsewhere.

• Sharing future success without high costs today: Young companies often do not have enough cash for high rewards. Thanks to employee shares, you can reward key people with a share in the future value of the company instead of immediate bonuses. If the company succeeds, everyone profits. A well-designed ESOP can create a strong "win-win" culture in a startup – employees and founders pull together with the prospect of joint success.

• Company culture and reputation: Offering shares to employees sends a signal that the company values them and believes in their contribution. Such a company appears modern and fair, which is appreciated not only by employees but also by investors or business partners. Abroad, employee ownership is a common standard, and Czech companies can now keep pace thanks to the new rules.

What was the situation until now and what was the problem?

Until recently, if a Czech company wanted to give an employee shares, it hit a tax barrier. Any benefit in the form of shares was taxed immediately upon allocation – similar to a salary. This meant that the employee had to pay a 15% income tax on the value of the shares right away. In addition, social security and health insurance contributions were payable as if it were a regular salary. This was extremely disadvantageous for employees: they had to pay taxes on something they had not even been paid yet. This absurdity – also known as "tax before cash" – deterred many companies and employees from ESOPs.

A recent amendment attempted to improve the situation by introducing the option of deferred taxation, but this brought its own complications. A temporary regime was created where it was possible to postpone taxation until the shares were sold, but only if strict conditions were met and with an obligation to report everything to the tax office.

Companies thus faced a difficult choice: tax immediately or defer – and in the case of deferral, monitor deadlines and administration, otherwise there was a risk of a tax assessment and penalties. In practice, the legal uncertainty led many enterprising founders to establish their startups abroad, where share-based motivation is simpler. The Czech state was thus depriving itself of future innovations and tax revenues.

A glimmer of hope for new rules in 2025: a revolution in ESOP 

The year 2025 brings a (potential) major breakthrough. It must be emphasised that so far, this is only in the Chamber of Deputies – the changes still have to pass through the Senate of the Czech Republic and be signed by the President. It is therefore not out of the question that the rules may still undergo certain changes. Nevertheless – after a long effort by the business community, a legislative change has finally been approved, setting a course that creates a modern framework for employee shares in the Czech Republic.

It seems the Czech Republic will finally join the ranks of Western countries where ESOPs are a common part of remuneration. The new regulation responds to the calls from startups for fairer conditions and removes the main obstacles. What do the newly approved rules contain? Here are the most important new features:

• "No tax before cash" – taxation only upon sale: The principle of "no tax before cash" now applies. Employees will pay income tax only when they actually monetise their shares, for example, by selling their stake to an investor or shares on the stock exchange. There is no longer a risk of them paying tax on a potential value they have not yet realised.

• No social security and health insurance contributions: Employee shares are exempt from social security and health insurance payments. Only income tax is levied on the increase in the value of the shares, which significantly reduces the overall tax burden. This point was one of the main demands of the startup scene – it was precisely these contributions that previously made ESOPs prohibitively expensive. Thanks to the change, the total burden is reduced to a level common in Europe.

• Voluntary regime with clear rules: The new ESOP regime is optional – a company can sign up for it (register with the tax administration) and must meet the specified conditions. The law finally precisely defines terms such as employee shares or options, the length of vesting (the period an employee must remain with the company before fully acquiring the shares), the maximum stake for one employee, and other requirements. A clear definition in the law increases legal certainty for both companies and employees – everyone now knows where they stand.

• Designed for small and medium-sized enterprises: The new regulation primarily targets startups and the SME segment. Companies with an annual turnover of up to CZK 2.5 billion (or a balance sheet total of up to CZK 2 billion) can use the preferential regime. The largest corporations above this limit can no longer use the preferential ESOP regime – but they tend to have other forms of remuneration. Restrictions also apply to specific sectors such as banks, insurance companies, audit and tax firms, or law firms, for which the ESOP regime has not been made available. The aim is mainly to support innovative young companies where sharing a stake makes the most sense.

• Minimum wage condition: For an employee to be able to acquire shares, their regular salary must be at least 1.2 times the minimum wage. This measure is intended to prevent circumvention of the law (e.g., paying only a symbolic salary and everything else in shares). In practice, ESOP serves as a bonus on top of standard remuneration, not a replacement for it.

• Effective from 2026: The approved changes are still heading to the Senate and the President, but all indications are that they will come into effect on 1 January 2026. This gives companies time to prepare. The lawyers at ARROWS already recommend starting to plan internal amendments to articles of association and setting up programmes so that everything is ready in time – the start of the new regime could be abrupt.

This legislative revolution is great news for Czech business. The Czech Startup Association welcomed the changes, stating that a functional ESOP is another key step towards the development of the startup environment. Similarly, the Ministry of Industry and Trade emphasises that thanks to the new rules, young companies will not flee abroad but will instead stay in the Czech Republic to develop their business and pay taxes here.

The country is thus moving to the level of Western Europe and the USA, which have had such regulations for a long time. Estonia's Skype was an inspiration – its employee share programme led to the creation of 950 new companies founded by former employees. In the Czech Republic, we can expect a similar effect thanks to ESOP: successful employees may eventually become entrepreneurs, which will further turn the wheels of innovation in the economy.

Tax implications and what to watch out for

The new employee share regime brings significant tax relief for companies, but it is necessary to comply with the legal rules to avoid losing the benefits. Let's summarise the main tax aspects and pitfalls:

1. Tax payment only upon sale of shares: As already mentioned, the employee now pays income tax (15% or 23% for high amounts) only when they actually turn the shares into money. The income from the sale of shares is taxed as regular income from dependent activity, but without insurance contributions. If the employee never sells the shares (e.g., holds them long-term or sells them only after leaving the company), the tax is paid only at the time of that sale. This is a huge advantage for employees compared to the past – there is no "upfront" burden where they had to pay out of their own pocket for something they might only gain in the future.

2. No social security and health insurance: No social security or health insurance is paid on the value of shares acquired by an employee. Neither the company nor the employee therefore pays an additional ~34% on this benefit, as would be the case with a salary. This dramatically reduces the overall tax burden of the programme. To illustrate: previously, when providing shares worth CZK 100,000, the employee and the company together would pay half of this amount in tax and insurance; now, upon a subsequent sale of the shares for the same amount, the employee would only pay CZK 15,000 in tax (approximately, depending on their tax rate).

3. Necessity to meet conditions and administrative requirements: Be careful – the benefits do not apply automatically. A company that wants to use the new ESOP regime must meet administrative and reporting obligations. Likewise, it is necessary to comply with all set limits and conditions (e.g., the aforementioned minimum employee income, limitation on the size of the stake, etc.). The lawyers at ARROWS warn that in case of a breach of the rules, both the company and the employee risk an additional tax assessment, penalties, or other sanctions. Fortunately, the regime is transparent, and with expert help, everything can be set up correctly.

4. Amendment of company documents: The introduction of an ESOP also requires careful legal preparation. It is necessary to stipulate in the articles of association or internal policies the conditions under which employees will acquire shares, what rights they will have (e.g., voting rights or entitlement to dividends), and what happens when an employee leaves the company.

Many companies have already incorporated provisions in their articles of association that employees can acquire shares on preferential terms – for example, they do not have to pay the full price of the share, the difference is covered by the company, and upon departure, they must offer the shares back. Such provisions protect both parties: the employee gets a stake on favourable terms, but the company is assured that the shares will not remain in the hands of someone who no longer works for the company. We recommend entrusting the setup of these rules to lawyers with experience in ESOPs – you will thus avoid ambiguities and future disputes.

How to implement an ESOP in practice?

Thanks to the new regulations, employee shares are becoming an attractive and accessible tool for rewarding employees while supporting company growth. However, for them to truly fulfil their purpose, the entire programme needs to be well thought out and legally secured. Every company is different – what works in a startup of ten people may require a different approach in a corporation with hundreds of employees.

We therefore recommend proceeding as follows: First, clarify the goals of the programme – who and how you want to motivate with shares (key developers, management, a wider circle of employees?). Then, have a tailor-made ESOP plan drawn up: define the conditions for acquiring shares (vesting, performance criteria, etc.), the percentage of the stake allocated for employees, and the rules for an employee's departure or the sale of the company. Don't forget the tax side – it pays to simulate various tax scenarios and make sure you meet all obligations to the authorities.

At this stage, it is worthwhile to involve experienced lawyers and tax advisors. The ARROWS law firm has extensive experience in setting up employee share plans and will guide you through the entire process from A to Z. We will help you prepare all the documents, communicate with the tax administration, and most importantly, set up the ESOP to best suit your needs while complying with current legislation. Mistakes in this area can be costly – but with our team, you will reliably avoid them.

Employee shares can be precisely the step that helps your company attract and retain the best people on the market. Now that the conditions in the Czech Republic are finally favourable, it is worth taking advantage of this opportunity. If you are considering introducing an ESOP, do not hesitate to contact us – the lawyers at ARROWS are ready to advise you and ensure that the entire process runs smoothly, legally, and to the full satisfaction of you and your employees.