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The Supreme Court clears up taxation of stock options

22.01.2007

The Supreme Court confirmed that the transaction made for tax evasion purposes can be re-qualified and tax reassessed. The Court also stated that tax evasion in essence is always intentional and therefore an extended limitation period is applied. In this decision the Court also reconfirmed the principles of taxation of employee stock options settled just in recent years. Finally the taxable moment of employee stock options is clear. The employee stock options having monetarily appraisable value to the receiving employee at the moment of grant are taxable at the moment of grant. In such case, the employer shall pay fringe benefit taxes on the difference between option premium and market value of the stock option. Stock options not monetarily appraisable at the moment of grant bring tax implications upon exercising the stock option by the employee. In such case fringe benefit taxes are imposed on the difference between the sales price of the underlying shares and the market value of the shares upon that moment.

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