Denmark: Proposed expansion of preferential tax scheme for SMEs offering share-based incentives to employees
Draft legislation expected to be introduced in November
It was announced in Parliament on October 7, 2025, that draft legislation will be introduced in November to significantly expand the scope of the preferential 7P tax scheme for small and medium-sized enterprises (SMEs) to make it easier to offer share-based incentives to employees.
Under the current 7P rules, it is generally possible to grant share-based incentives to employees at a value corresponding to up to 10% of the employee's salary. Taxation is postponed until sale of the shares, and grants of share-based incentives are treated as share income at a rate of 27% or 42%, rather than as salary. The threshold is 20% of salary for certain widely offered schemes, and 50% of salary for newly started SMEs. All of the limits require a valuation of the share-based incentives, which can be burdensome for unlisted companies.
The draft legislation would repeal the 50% of salary limit for SMEs, which would also mean valuation would no longer be necessary. Furthermore, the definition of SMEs would be significantly expanded.
Read an October 2025 report prepared by the KPMG member firm in Denmark