Science & Technology

Germany to Help Its Tech Industry to Compete With Silicon Valley

Germany has approved a package of reforms in the sphere of capital that will help this country’s technology sector compete with Silicon Valley.

Germany to Help Its Tech Industry to Compete With Silicon Valley

The specified reforms will come into force on January 1 next year. As part of these innovations, many changes are envisaged in the system of remuneration for startups based on shares. The listing of companies and the concept of taxation will also be transformed.

The German technology sector expected the introduction of these reforms, which should activate the process of development of this industry.

Some of the main innovations will concern employee stock option plans, which allow companies to transfer part of the business to their workers.

Martin Mignot, a partner at Index Ventures, who has repeatedly stated the need to reform the policy in the area of stock options in Europe, says that the previous version of the legislative framework governing the relevant processes was unprofitable and unfair. He noted that there was an official ESOP plan in Germany, which was so cumbersome from an administrative point of view that each minority shareholder received almost the right to vote and veto, and insignificant tax benefits. According to him, this practice has led to the fact that the companies have become almost impossible to use the specified plan.

According to the new German rules regarding ESOP, taxes on employee stock options will be deferred until the moment of sale. This decision was made so that the owners of securities would not face the prospect of taxation immediately after receiving this asset. The scope of this practice will be expanded. This is necessary to take advantage of more companies that are in a state of growth.

The threshold for firms with access to ESOP will be raised so that organizations with a staff of less than 1,000 people and annual revenue of less than 100 million euros ($108.7 million) will be able to distribute shares among employees.

The rules for capital gains taxation will be changed so that representatives of companies are taxed on the profits they receive when selling securities. This decision reflects the risk taken by the employees of a startup that has not yet fully proven its viability.

The innovations also provide that companies registered in Germany have the opportunity to issue dual-class shares.

As we have reported earlier, Germany Reportedly Plans to Dole Out €20 Billion to Bolster Semiconductor Manufacturing.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.