Stock options in Italy: how they’re taxed, with a worked example

Give a developer in Milan options on 1,000 shares of an ordinary company, and on the day she exercises she may owe income tax on a gain she hasn’t cashed, withheld through payroll. Grant the same options in an innovative startup and, if a few conditions hold, nothing is taxed until she sells.

That gap is why founders should know how stock options in Italy are taxed before writing a plan, and employees before signing one. Below: the ordinary rules, the startup regime and how it’s lost, SRLs, phantom shares, a worked example and a checklist. New to equity? Start from our map from zero to a first round.

How are stock options taxed in Italy in an ordinary company?

Most companies live under the general rule. Article 51 of the income tax code, the TUIR, treats as employment income everything you receive in connection with your job. Stock options have had no special break since June 2008, when decree-law 112/2008 abolished it, and the Agenzia delle Entrate’s circular 54/E confirmed that the shares’ value at exercise minus the price paid is always employment income.

Timing follows the exercise. In ruling 23 of 5 February 2020 the Agenzia confirmed that for an option you can’t freely transfer, the taxable moment is the exercise, and the amount is the shares’ normal value under article 9 of the TUIR minus what you paid. For shares on a regulated market, that’s the average price of the last month. For other shares and for quotas, it’s a pro-rata slice of net equity (or of the capital contributed, in a new company), which can sit far from the last round’s price. Ask your commercialista how it applies.

Your employer withholds the tax through payroll. That’s the cash problem: you pay when you exercise, not when you sell. On a sale, any further gain is taxed at 26% in 2026, and the value already taxed as salary counts as your cost. Nothing is taxed twice.

Social security is kinder. Since 25 June 2008 stock option income has been outside the INPS contribution base, on conditions INPS set out in message 25602 of 2010: the plan isn’t open to all employees, it depends on conditions such as vesting, staying employed or company results, and it delivers only shares. Plans that pay the shares’ value in cash don’t qualify.

One smaller break: shares offered to all employees are exempt up to €2,065.83 a year (4 million lire in the TUIR’s text), as long as they aren’t sold, or bought back by the employer, within three years.

The innovative startup stock option tax exemption

Here Italian law is generous. Under article 27 of decree-law 179/2012, income from shares, quotas, participating instruments and options that an innovative startup assigns to its own directors, employees and continuous collaborators isn’t taxable, for tax or for social security. Exercise is covered and, unlike the article 51 break, there’s no cap. Innovative startups are companies entered in a special section of the business register; our guide to Italy’s innovative startup rules lists the requirements.

• Issued by the company. The startup the person works for, or a company it directly controls. Quotas a founder transfers personally aren’t mentioned, so don’t assume they qualify.
• The right people. Directors, employees, continuous collaborators. The Agenzia excludes occasional contractors, whose income is ‘other income’, and directors paid as self-employed professionals generally fall under a different paragraph.
• No buy-back. If the startup, the issuer or a group company buys the instruments back, the exempt value becomes employment income in the year of the sale. There’s no time limit.
• Granted while the status lasts. Options assigned while the company qualifies stay exempt even if exercised after the status ends.

And innovative SMEs? They’re covered too. Decree-law 3/2015 carried the rule over to them; if you want it in writing, see the Agenzia’s ruling 167 of 2023. Since 2025, startup status lasts three years as standard, with limited extensions, so plan early. On a sale the gain is ‘other income’ under article 67 of the TUIR; after a free grant your cost is zero, so the whole amount is a capital gain. Paying advisers in equity falls under paragraph 4 of the same article: see our guide to advisor equity.

Instrument by instrument: when the tax falls due

The whole map on one screen.

Instrument	When tax is due	How it’s taxed	Conditions
Options in an ordinary company	At exercise, then on sale	Value minus price paid as employment income; later gain at 26%	No INPS if the plan isn’t for all staff, has conditions and delivers shares
Shares offered to all employees	When received	Exempt up to €2,065.83 a year; above that, employment income	Not sold or bought back by the employer within three years
Options, shares or quotas in an innovative startup or SME	Only on sale	Whole gain at 26% as other income	Issued by the company; directors, employees, continuous collaborators; no buy-back by the group
Phantom shares	When paid	Employment income at the marginal rate	No INPS exemption: contributions due

Stock options in an SRL: what changes

An SRL has no shares to grant. Article 2468 of the Civil Code says its quotas can’t be represented by shares, so American-style stock options don’t exist as such. Which route is open to you, then? That depends on what kind of SRL you run.

• Innovative startups and innovative SMEs can simply grant quotas. Article 27 lists quotas right next to shares, so the exemption holds.
• Any SRL that is an SME may deal in its own quotas for an incentive plan for employees, collaborators, directors and service providers. Article 2474 normally forbids it; decree-law 179/2012 lifted the ban for startups and decree-law 50/2017 extended that to SME SRLs. No tax break comes with it, though.
• Everyone else uses a reserved capital increase or a founder’s transfer, with an option agreement on top. If the plan really needs shares, compare an SRL with an SpA first.

One trap belongs to startups. If your leaver clause lets the company buy back an early leaver’s quotas, that buy-back is exactly what makes the exempt value taxable. Design vesting, equity earned over time, and the cliff, the minimum period before anything vests, with that in mind, as you would in a co-founder equity split.

Phantom shares in Italy: taxed like salary

Phantom shares promise a cash payment linked to the value of the company’s shares, without issuing any. Under article 51(1) of the TUIR every sum received in connection with the job is employment income in the tax period you receive it, so the payout is taxed like a bonus, through payroll. INPS’s 2010 message says its exemption doesn’t apply to plans that pay the shares’ value in cash, so contributions are due. And article 27 covers instruments and options, not cash.

Why use them? Nobody joins the cap table, and in an SRL no quota changes hands. For a small team that simplicity can be worth the higher tax. Weighing cash against equity at the top of the company? See how founders set their own salary after a round.

A worked example: the same options under three regimes

The person and the companies are invented. The 2026 rates are real.

Say Giulia earns €60,000 a year. In 2026 IRPEF takes 23% up to €28,000, 33% up to €50,000 and 43% above that, so every extra euro of pay costs her 43 cents in tax. Her options cover 1,000 shares at €10 apiece. She exercises at €30, then sells two years on at €50. Regional and municipal surcharges depend on where she lives, so we leave them out.

	Ordinary listed company	Innovative startup (art. 27)	Phantom shares
At exercise	€20,000 of employment income × 43% = €8,600, withheld through payroll	Nothing to pay	Nothing happens
At sale or payout (€50)	€20,000 capital gain × 26% = €5,200	€40,000 capital gain × 26% = €10,400	€40,000 bonus × 43% = €17,200
INPS contributions	None, if the plan meets INPS’s conditions	None	Due on the payout
Total income tax	€13,800	€10,400	€17,200

Three lessons. In the ordinary company Giulia pays €8,600 two years before she sees any cash. The startup regime saves her €3,400 and, more usefully, moves all the tax to the day she has the money. Phantom shares cost the most, because the whole gain is taxed as pay.

One twist. If the startup itself buys Giulia’s shares back at €50, the €20,000 exempt at exercise becomes employment income that year (€8,600), and the other €20,000 is taxed at 26%. Same €13,800 as the ordinary company. Just later.

Elsewhere the logic is similar. The IRS taxes US non-statutory options at exercise, on fair market value less the price paid. Incentive stock options generally trigger no regular income tax at grant or exercise, though the alternative minimum tax may apply, and if the holding periods are met the sale is generally a capital gain.

Want to see what a plan does to everyone’s stake before you promise it? Our Investor-Ready Kit (€149) includes a cap table simulator, along with a deck template, a runway model, a data room checklist and investor emails. To work it out by hand, follow our cap table explained with a worked example.

Checklist before you promise options

1. Confirm your status, innovative startup or innovative SME, and how long it lasts.
2. Size the option pool, the slice of equity reserved for the team, with our guide to employee option pools.
3. Pick the instrument: options, shares, quotas, participating instruments or cash.
4. Write vesting and the cliff into the plan, then check the leaver clause against the buy-back rule.
5. Grant while the status lasts, and date every assignment.
6. Model the dilution on a fully diluted cap table before anyone signs.
7. Give each employee one page on when the tax falls due.

This article is general information, not legal or tax advice. Tax rules change and every plan is different: have a commercialista check yours before you grant or exercise anything.