26.06.2026
Employee Participation with Hurdle Shares: Tax Administration Creates Legal Certainty
Employee participation is an important tool for many growth companies to involve employees in future success without having to pay high salaries immediately. With guidance of 28 May 2026, the Bavarian State Tax Office ("BayLfSt") has taken a position on how employee participation arrangements with a negative liquidation preference, i.e. so-called Hurdle Shares, are to be classified for wage tax purposes. For the first time, the tax administration now provides clarity on when the grant of such shares gives rise to employment income and how later proceeds are to be treated for tax purposes.
