Section 19a

The German government is proposing to increase the tax exemption under section 19a of the German Income Tax Act (19a Einkommensteuergesetz).

Under section 19a, employees who receive an award of free shares or shares at a discount from their employer may benefit from an exemption from tax and social security contributions of EUR 135 per year or, if lower, 50% of the taxable value of the shares (before the tax exemption is taken into account).

Under the proposals, the exemption would be increased to EUR 360 or, if lower, 100% of the taxable value (before tax exemption).

If this proposal becomes law, it would take effect from 1 January 2009.