The Taxation Of Stock Options

Companies can offer their employees, in addition to their salary and bonuses, the opportunity to become shareholders in favorable conditions, through stock options.

The stock options are call options for shares at a fixed price. The advantage of the device and its incentive, is that the purchase price is low enough, so that when the option is exercised, that is to say where the person ‘exercised to buy its shares, it pays a price below their course.

In general, it sells its shares immediately after they acquired, and thus gains an added value, which corresponds to the increase in the value of the title.

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Gains From Stock Options

The option exercise is definitely realized and marks the actual acquisition of the shares at the option price:

  • By his statement;
  • Accompanied by an option exercise form;
  • And payment of the corresponding amount.

When the option is exercised and that these shares are subject to a disposal, three types of gains can be made:

  • A discount
  • A benefit derived from the option is exercised
  • A gain on the sale of securities

These gains are taxable under income tax

Taxation Of Stock Options

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The Discount

The discount obtained through stock options is taxable. The discount is equal to the difference between the value of the security at the time of the offer of the option, and the price at which the option is available to the beneficiary. The discount ranges between 0 and 20% of the value of the security.

Only the discount surplus told (discount that exceeds 5% of the value of the share at the date of grant) is taxable year in which the option is exercised. It is likened to a wage supplement and is taxable in the category of wages and salaries.

The Option of Lifting

The exercise of the option marks the actual acquisition of the shares.

Note: In general, it sells its shares just after having acquired, and thus gains an added value, which corresponds to the increase in the value of the title.

Raising the option, the beneficiary of stock options purchases its shares at a price lower than the price of the course. The option exercise is, therefore, fiscally assimilated to a wage supplement. As such, it is taxed at the income tax.

The benefit from the exercise of stock options is equal to the difference between:

  • The actual value of the share at the option’s exercise date
  • And the subscription or purchase price of this action

This gain is taxable, as the transfers corresponding actions are performed:

  • For profit
  • Or for free

This benefit is taxable:

  • The year in which the employee has converted bearer shares or transferred them or gave them for rent;
  • In the category of wages and salaries in particular ways.

Note: Taxation on favorable terms is subject to the retention of shares during a certain period, said unavailability. For options granted since April 27, 2000, there is a second time, said porting.

This option exercise gain is taxed under the following conditions:

  • the fraction of the discount exceeding 5% is added to taxable wages and salaries for the year the option is exercised;
  • the balance of the discount is taxed as the year of sale, or if appropriate conversion of bearer securities.

The Capital Gain from Disposal of Securities

The disposal of surplus value realized in the framework of stock options is taxable under the rules securities gains of individuals.