Taxing stock options

OECD Observer
Page 6 

How can a multinational company offer stock or share options to its employees when the rules governing those options are different in the various countries where it operates? And how will they be taxed?

These thorny questions have made multinationals very cautious when introducing plans into different countries, so as to avoid unpleasant tax and regulatory surprises. But stock option schemes have a reputation as a good way of attracting staff, especially to start-up companies, and a good way of keeping employees loyal. They give employees the right to buy shares in the company they work for at a pre-determined, fixed price in the future. If share prices rise, the employee can buy shares at the lower, fixed price, then sell them at current market prices at a profit. If share prices fall, employees can simply let the options expire – nothing gained, but nothing ventured either.

Now the OECD is looking at how such schemes can do more to encourage entrepreneurship, particularly in start-ups. One report due out in November will assess the effectiveness of share option schemes and look at differences in the ways they are treated within the OECD area for tax and regulatory purposes. Some countries tax stock options when they are granted, for example, while others tax them when they are exercised and/or sold. Moreover there is a lively debate as to whether gains realised through the exercise of options should be treated as employment income, or more lightly taxed capital gains. OECD expert, Peter Avery, said the report would provide ideas for improving policies that govern options.

The OECD is also looking at cross-border tax issues related to stock options. Tax treaty experts from OECD countries will meet in Amsterdam in November to debate how stock options should be taxed when people move abroad, and who should get the revenue. Guidelines on this issue are expected some time after 2002.

©OECD Observer No 229, November 2001 

Economic data


Stay up-to-date with the latest news from the OECD by signing up for our e-newsletter :

Twitter feed

Suscribe now

<b>Subscribe now!</b>

To receive your exclusive paper editions delivered to you directly

Online edition
Previous editions

Don't miss

  • How do the largest community of British expats living in Spain feel about Brexit? Britons living in Orihuela Costa, Alicante give their views.
  • Brexit is taking up Europe's energy and focus, according to OECD Secretary-General Angel Gurría. Watch video.
  • OECD Chief Economist Catherine Mann and former Bank of England Governor Mervyn King discuss the economic merits of a US border adjustment tax and the outlook for US economic growth.
  • Africa's cities at the forefront of progress: Africa is urbanising at a historically rapid pace coupled with an unprecedented demographic boom. By 2050, about 56% of Africans are expected to live in cities. This poses major policy challenges, but make no mistake: Africa’s cities and towns are engines of progress that, if harnessed correctly, can fuel the entire continent’s sustainable development.
  • OECD Observer i-Sheet Series: OECD Observer i-Sheets are smart contents pages on major issues and events. Use them to find current or recent articles, video, books and working papers. To browse on paper and read on line, or simply download.
  • How sustainable is the ocean as a source of economic development? The Ocean Economy in 2030 examines the risks and uncertainties surrounding the future development of ocean industries, the innovations required in science and technology to support their progress, their potential contribution to green growth and some of the implications for ocean management.
  • The OECD Gender Initiative examines existing barriers to gender equality in education, employment, and entrepreneurship. The gender portal monitors the progress made by governments to promote gender equality in both OECD and non-OECD countries and provides good practices based on analytical tools and reliable data.
  • They are green and local --It’s a new generation of entrepreneurs in Kenya with big dreams of sustainable energy and the drive to see their innovative technologies throughout Africa.
  • Interested in a career in Paris at the OECD? The OECD is a major international organisation, with a mission to build better policies for better lives. With our hub based in one of the world's global cities and offices across continents, find out more at .

Most Popular Articles

OECD Insights Blog

NOTE: All signed articles in the OECD Observer express the opinions of the authors
and do not necessarily represent the official views of OECD member countries.

All rights reserved. OECD 2017