The taxation of employee stock options.

Format:

Book

Government document

Author/Creator:

Organisation for Economic Co-operation and Development.

Contributor:

Organisation for Economic Co-operation and Development.

Series:

OECD tax policy studies ; no. 11.

OECD tax policy studies ; no. 11

Language:

English

Subjects (All):

Employee stock options--Taxation.

Employee stock options.

Physical Description:

1 online resource (170 pages)

Place of Publication:

Paris : OECD, 2005.

Language Note:

English

Summary:

Employee stock option plans have become a common component of remuneration packages in multinational enterprises. This publication presents and examines the many important tax issues that arise for beneficiaries and companies. Focusing first on domestic tax issues, it considers what tax treatment would provide no tax-related incentives for a company to either increase or cut the use of stock options, and would be neutral regarding the choice of either granting stock options or paying ordinary salary. The approach is non-prescriptive and serves to provide a benchmark for policymakers. This is complemented by a survey of taxation of stock options in OECD countries in 2002 that calculates the effective rate of tax and compares it with tax on ordinary salary. Cross-border taxation issues are then discussed. Issues such as the timing of the benefits from stock options, the distinction between employment income and capital gains and the identification of the services to which they relate are relevant to the application of tax treaties, which are based on the OECD Model Tax Convention, and the resulting changes to the Model's Commentary are fully explained. Finally, the effects on transfer pricing are analysed in three circumstances: when an enterprise grants stock options to employees of a subsidiary in another country, when using transfer pricing methods that are affected by remuneration costs, and when employees benefiting from stock options are involved in activities that are the subject of a cost contribution arrangement.

Contents:

Foreword; Table of Contents; Chapter 1. Tax Neutrality; 1. Introduction; 2. The case of certainty with only corporate taxes; 3. Introducing personal level taxation; 4. Introducing uncertainty; 5. Introducing possible different productivity; 6. Introducing employees' risk aversion; 7. Summary; Notes; References; Annex 1.A1. The Algebra of Neutrality; Chapter 2. Effective Tax Rates; 1. Introduction; 2. Qualitative description of the tax treatments; 3. Tax wedges on stock options and incentive pay schemes: the calculation methodology and results

4. Comparison between stock options and ordinary salary5. Comparison between stock options and ordinary salary for higher levels of income; Notes; Chapter 3. Cross-border Income Tax Issues; 1. Introduction; 2. Background on ESOPs; 3. Issues related to the employee; 4. Issues related to the employer; Notes; Annex 3.A1. Graphical Illustration; Annex 3.A2. Changes to the OECD Model Tax Convention; Chapter 4. Impact on Transfer Pricing; 1. Introduction - Scope of the study

2. Situation I: An enterprise grants stock options to employees of an associated enterprise that is resident in another tax jurisdiction.3. Situation II; 4. Situation III: The impact of stock options on Cost Contribution Arrangements (CCAs); Notes

Notes:

Includes bibliographical references.

ISBN:

9789264012493 (PDF)

9786610606580

92-64-01249-4

OCLC:

703869025