Singapore Issues e-Tax Guide For ESOPS

By Editorial 26 June, 2013

In a revised e-tax guide, the Inland Revenue Authority of Singapore has set out an explanation of the tax treatment of the gains and profits derived from employee stock options (ESOP) and other forms of employee share ownership (ESOW) plans, as well as the relevant administrative requirements.

It was said that the guide would be relevant to individuals who are granted shares under ESOP or ESOW plans, and also companies that grant shares under these plans to any individual by reason of any office or employment held by the person (e.g. a director).

In essence, for shares granted prior to January 1, 2003 under any ESOP or ESOW plans, the gain is subject to tax if the individual is physically present in Singapore, or exercising employment in Singapore, while he or she exercises the stock option under ESOP or the shares granted under ESOW are vested to him.

For shares granted on or after January 1, 2003 under any ESOP or ESOW plans, the gain derived from the plans is taxable if the individual is granted the options or shares while he is exercising employment in Singapore.

Generally, the amount of taxable gains or profits is the difference between the open market price of the shares at the time of exercising/accruing/vesting of the ESOP/ESOW and the amount paid by the individual for such shares.

A deemed exercise rule applies when a foreigner ceases employment or Singapore Permanent Residents leave Singapore permanently. Under the rule, the final gains from unexercised ESOPs or ESOWs are deemed to be income derived by the individual one month before the date of cessation of employment or on the date the right or benefit is granted, whichever is the later.

Tags: Individuals | Expatriates | Capital Gains Tax (CGT) | Compliance | Tax | Business | Tax Compliance | Share Schemes | Employees | Singapore |


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