(ESOP) ANd EMPLOYEE SHARE OWNERSHIP ... - bdo singapore

The taxable value under the deemed exercise rule is computed as:
A – B
Where
A – is the open market price of the shares one month before the
date the individual ceases employment or the date of the grant
of the stock options, whichever is the later ; and
B – is the
• exercise price payable under the unexercised ESOP; or
• exercise price of the shares under restricted ESOP; or
• price paid or payable for shares acquired under an ESOW Plan
with vesting imposed (with no moratorium); or
• price paid or payable for restricted shares acquired under an
ESOW Plan, as the case may be.
Tracking Option
As an alternate to the deemed exercise rule, the employer
may elect for the tracking option scheme instead. Under this
scheme, the employer is required to compute and to report
the gains to the IRAS. However, the payment of taxes may be
deferred to the date when the options are exercised. In order
to be eligible for the tracking option, employers are required to
provide an undertaking that taxes would be paid. Additionally,
there are several conditions that need to be satisfied in order to
be eligible for the tracking option.
Prior approval must be sought from the IRAS before the
employer could operate under this scheme.
The final gain must be reported to IRAS in order to process the
employee’s tax clearance assessment prior to departure from
Singapore.
However, in the event that the actual gains derived upon the
exercise of the options are lower than that computed under the
“deemed exercise” rule, the employee may apply to the IRAS to
have a reassessment of his tax liability:-
• Within 6 years from the year of assessment following the year
in which the deemed exercise rule is applied ; and
• To furnish the relevant documentation to demonstrate that
the actual tax liability is lower than that computed under the
“deemed exercise rule”.
Rohan Solapurkar
Tax Director
Tax Advisory
rohan@bdo.com.sg
Direct: +65 6828 9171