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Comment by therealarmen | Hacker News Reader

For the lazy, that works out to $120,000 per employee if split equally. Anyone know what kind of taxes this is subject to?

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Sweden has high taxes, depends on how he does it. If the money is first given to him and then he redistributes it then he'll most likely lose $1.5m on tax (50%). Otherwise, no idea.

$120k is high enough to pay full taxes on anyway so no matter how they distribute it, they will very likely loose half to taxes.

This is one reason why, at US tax rates, it would be more efficient to split the bonus over 2 or more years. Also, that delayed vesting could help with retention.

There is no tax advantage in the U.S. to splitting a dividend into two years. Dividends are taxed at a flat rate, currently 15%.

Is there a different tax rate if the employees received the equivalent amount in shares and then sold it?

That has many complications.

If he gave the amount in shares, they have the shares and could sit on them. This may have problems with shareholders voting rights and such like. (Which is why you should always try to have 50% of a companies shares in the ideal world.)

If they wanted to sell them they need to find a buyer, and if one person bought many of the shares they may end up in a controlling position of the company.

I think that like share dividends in the UK, it attracts a lower tax rate. I think Sweden is 30%?

However, "gifting" monies to people is a strange area, with various odd rules.

You can only give away a certain amount of money a year in the UK, and that depends on who it is you are giving to or even the circumstance. (EG, you can gift £5,000 as a wedding gift.)

If I had to guess, I imagine he refused a dividend and instead had the company issue the equivalent sum in bonuses to the employees. Tax wise it'd make no sense for him to take a dividend and then create havoc by gifting it. (At least, under UK style tax law.)

I don't know how it would work out in this particular case (there might be other juridical complications) but Sweden has no taxes (any longer) on gifts.

You can't give a gift to employees. Otherwise everybody would get part of their salary as a gift.

But once the dividend tax is paid to make the money Notch's, and not Mojang's, the money no longer comes from the employer, does it? </not-an-accountant>

Gifts are no longer taxes in Sweden but it is likely that the tax authority will regard it as income (Or bonus) and they will pay 50-56% taxes on the lot. Quite tricky but I assume Mojang has good accountants that will work it out!

Yeah, it should get caught somehow otherwise companies would just gift their employees every month ;-)

So I suspect gifting would still be tax inefficient, since he'd have paid taxes on the dividend and then employees would pay tax on the gift.. whereas skipping the dividend and just getting bonuses could cut out one whole layer of tax.

There's no tax on gifts in Sweden, and the dividend tax is 30%, compared to 50% or so on salaries. So if the IRS doesn't consider it a compensation for work (which they will, of course) gifting the dividends would mean less tax.

I assume Mojang has good accountants

If they don't, they just take a slice of the $3mil and give it to an accountant.

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