ESOP & ESOW taxation question - what if the stock loses value?

[radioburn]

Hi everyone, have a tax question here which I'm hoping those more knowledgeable than myself can help shed some light on.

Say an employer provides both Employee Stock Options (ESOP) & Employee Share Ownership (ESOW)s. I understand whilst there is no capital gains tax when you sell these at a profit, these are still taxed as part of income when the options are granted (or if there are vesting periods, the year in which they vest). I believe that the amount that qualifies for tax is basically the difference between the exercise price of the ESOP/ESOW vs the Open Market value, at the date of grant.

My question is this: what happens if the Open Market value (i.e. the stock price) falls significantly after this has been calculated for IRAS? As this would result in the employees (who did not sell the stock) having a much higher tax bill to pay, even though the stock has lost most of it's value (thus the actual income gained from the granting of the stock was much less than before). Is there a recourse for them, other than pursuing the Qualified Employee Equity-based Remuneration Scheme (QEEBR Scheme - link below) that allows for a tax deferment of up to 5 years (although there is variable interest charge)?

https://www.iras.gov.sg/taxes/individua ... ck-options

Appreciate any & all feedback/advice on the above!

[ProvenPracticalFlexible]

Basically as far as I recall (I never compared my actual tax bill for the exact dates) it's taxed based on the extra gains on the date when you get access/control to the shares. So if you want to avoid any risk of paying because the stock lost it's value, just cash them all immediately when they are vested.

It's quite logical actually, after the exercise/vesting/grant date is like any other investment in shares: at your own risk.

That's from person only taxed in Singapore. If you have to deal with American tax authorities, I don't even want to guess what else could be there.

[radioburn]

Basically as far as I recall (I never compared my actual tax bill for the exact dates) it's taxed based on the extra gains on the date when you get access/control to the shares. So if you want to avoid any risk of paying because the stock lost it's value, just cash them all immediately when they are vested.

It's quite logical actually, after the exercise/vesting/grant date is like any other investment in shares: at your own risk.

That's from person only taxed in Singapore. If you have to deal with American tax authorities, I don't even want to guess what else could be there.

Thank you! That's what I figured as well but was hoping for a longshot. Appreciate the feedback.