In this news:
Options on foreign company stock offer exciting opportunities for U.S. employees. They come with ... More complex U.S. tax implications, however, that can catch the uninformed off guard.
As more Americans take on international roles, stock options have become a key part of the expatriate executive’s compensation package, especially when working for foreign employers. These options offer exciting opportunities to benefit from a company’s growth, but they also come with complex U.S. tax implications that can catch the unwary off guard.
Imagine you’re an American executive at a tech startup in London, and your employer offers you stock options as a perk. It’s a chance to share in the company’s success, but what does it mean for your U.S. taxes? The rules differ from those for traditional wages, and missteps can lead to unexpected tax bills.
This article breaks down the U.S. tax treatment of non-statutory stock options. These are the most common type received from foreign employers as they are not granted under either an employee stock purchase plan or an incentive stock option plan.
Each stage of stock options given in connection with employment from grant, to exercise, and a later sale of purchased shares has tax implications. This article highlights the key U.S. tax considerations at every step and reviews a tax planning strategy that could save money.
1. Grant of the Stock Option: Usually No Tax, But Watch Out
When a foreign employer grants an individual non-statutory stock options, the individual typically does not owe U.S. tax because of the option grant. This assumes the options lack what is called a “readily ascertainable fair market value”, which is common with private companies since options on such stock are not publicly traded.
.png)
