This statement presents the position of the Finnish Startup Community on the taxation of employee stock options. Its main purpose is to explain why the current tax model for employee options in Finland is harming startups, employees, and the national economy, and to propose concrete changes to make the system fairer, simpler, and more competitive internationally.
Employee stock options have become an essential tool for startups to attract, motivate, and retain highly skilled talent, especially when companies cannot yet compete with large corporations on cash salaries. As Finnish startups have grown rapidly over the past decade, the value of these options has increased significantly. However, the current tax system has not evolved accordingly and now creates serious practical problems.
Under the current Finnish model, employees are taxed when options are converted into shares, even though they do not receive any cash at that moment. This means employees may face a large tax bill based on an estimated share value, without certainty that the shares can later be sold or will retain that value. Because startup shares are usually illiquid and often subject to sale restrictions, employees may be unable to sell shares to pay the tax. This creates personal financial risk and often discourages employees from exercising their options at all.
As a result, options are frequently left unused or cancelled. This leads to lost opportunities for employees, weaker domestic ownership, reduced ability for startups to recruit top talent, and lower tax revenues for the state in the long run.
Our statement argues that Finland should reform employee option taxation around two main goals. First, taxation should occur only when the employee actually receives cash, meaning when the shares or options are sold. This ensures that tax is paid on real, realized income rather than hypothetical value. Second, income from employee stock options should be taxed entirely as capital income, rather than partly as earned income. This would make the system simpler, more predictable, and aligned with how ownership and investment risk function in practice.
By adopting these changes, Finland would move closer to the most competitive European models, strengthen its startup ecosystem, support employee ownership, and ultimately increase sustainable economic growth and tax revenues. The overall aim is to make Finland a genuinely attractive place to build, work in, and own high growth companies.