As an employee, you may receive
- Employee Share Option (ESOP)
An employee who is granted share options by an employer is subject to tax on any gains or profits arising from the exercise of the share option. This also applies to any other person who is granted share options as a result of any office held by him (e.g. a director or an external auditor).
- Other Forms of Employee Share Ownership (ESOW) Plan
ESOW plans are plans that allow an employee of a company to own or purchase shares in the company or in its parent company. They include share awards and other similar forms of employee share purchase plans (excluding phantom shares and share appreciation rights).
When is it taxable
ESOW plans with NO vesting imposed
The gains are taxable in the year when the shares are granted.
- ESOP/ ESOW plans with vesting imposed
| ESOP/ESOW plan granted while an individual is exercising employment in Singapore |
| Granted before 1 Jan 2003 * |
The gains from any ESOP/ESOW plans are taxable in Singapore if the ESOP/ESOW plans are exercised/vested while you are physically present in Singapore or holding an employment in Singapore. |
| Granted on or after 1 Jan 2003 |
The gains from any ESOP/ESOW plans are taxable in Singapore.
This is regardless of where you exercise/vest the ESOP/ESOW plans, as the gains will be taxed to the extent that they are connected with Singapore employment. |
* Notwithstanding the repeal of the old section 10(5) of the Income Tax Act [2001 Ed], gains from ESOP/ESOW granted before 1 Jan 2003 is still subject to tax. The intention of repealing the old section 10(5) and enacting section 10(6) is to legislate a new basis of taxation from 2003 rather than exempt the gains from options granted before 2003.
| ESOP/ESOW plans granted while an individual is NOT exercising employment in Singapore * |
| Exercised before 1 Jan 2002 |
The gains from any ESOP/ESOW plans are taxable in Singapore if the ESOP/ESOW plans are exercised/vested while you are physically present in Singapore or holding an employment in Singapore. |
| Exercised on or after 1 Jan 2002 |
The gains from any ESOP/ESOW plans are not taxable in Singapore even if the ESOP/ESOW plans are exercised/vested while you are physically present in Singapore or holding an employment in Singapore.
However if you are a tax resident of Singapore and have remitted any amount of the gains or profits to Singapore before 1 Jan 2004, the amount remitted is taxable in Singapore. Remittances to Singapore made on or after 1 Jan 2004 are exempt from tax. |
* This does not apply to an employee who was temporarily away, as such absence from Singapore would be treated as incidental to his Singapore employment.
How we tax gains from ESOP/ESOW plans
For foreigners and Singapore permanent residents (SPRs)
Deemed exercise rule applies when a foreigner ceases employment or SPRs leave Singapore permanently.
How to compute gains from ESOP/ESOW plans
- Without selling restriction
| |
ESOP |
ESOW plan (with vesting imposed) |
ESOW plan (with no vesting imposed) |
| Open market price of share on |
Date of exercise |
Date of vesting |
Date of grant |
| Less |
Price paid by you for the shares (exercise price) |
Example
| Open market price per share on date of exercise |
Exercise price per share |
Number of shares acquired |
Gains from ESOP |
| (a) |
(b) |
(c) |
[(a) - (b)] x (c) |
| $10 |
$5 |
100 |
$500 |
- With selling restriction (moratorium)
| Open market price of the shares on the date the selling restriction is lifted |
- |
Exercise price of the shares |
= |
Taxable gain |
For foreigners and Singapore permanent residents (SPRs)
Deemed exercise rule applies when a foreigner ceases employment or SPRs leave Singapore permanently.
Tax Deferment Scheme
Qualified Employee Equity-based Remuneration Scheme (Qualified EEBR Scheme)
| Incentives |
Payment of tax on gains arising from stock options/shares can be deferred for up to 5 years |
| The deferred tax is subject to an interest charge. |
| How to qualify |
Please refer to the circular on Qualified EEBR Scheme (36KB) (previously known as Qualified Employee Stock Option Scheme) |
| How to apply |
You must submit the form 'Application for deferment of tax attributable to gains from ESOP/ESOW plans under the Qualified EEBR Scheme' (121KB). |
| The form must be submitted (with employer's certification) to the Comptroller of Income Tax not later than 15 April, together with your income tax form or separately if you e-File your tax return. |
Incentive Schemes
Equity Remuneration Incentive Scheme (SMEs) [ERIS (SMEs)]
(previously known as Entrepreneurial Employee Equity-based Remuneration Scheme)
| Incentives |
You can enjoy 50% tax exemption on the gains arising from your stock option/shares up to $10 million, over a period of 10 years. |
| How to qualify |
Please refer to the circular on Entrepreneurial Employee Stock Options Scheme [Renamed ERIS (SMEs)] (195KB) |
| How to claim |
If your employer is participating in the Auto-inclusion scheme for employment income, the details of the gains will be sent to IRAS electronically. |
| Otherwise, you must submit Appendix 8B (66KB) (details of gains and profits from ESOP/ESOW plans) together with your income tax form or separately if you e-File your income tax. |
Equity Remuneration Incentive Scheme (All Corporations) [ERIS (All Corporations)]
(previously known as Company Employee Equity-based Remuneration Scheme)
| Incentives |
You can enjoy tax exemption on the gains arising from your stock option/shares up to $1 million, over a period of 10 years.
Tax exemption on the gains is computed as follows:
- full tax exemption on the first $2,000 of gains - 25% tax exemption on the remaining amount of gains |
| How to qualify |
Please refer to the circular on Company Stock Option Scheme [Renamed ERIS (All Corporations)] (246KB) |
| How to claim |
If your employer is participating in the Auto-inclusion scheme for employment income, the details of the gains will be sent to IRAS electronically. |
| Otherwise, you must submit Appendix 8B (66KB) (details of gains and profits from ESOP/ESOW plans) together with your income tax form or separately if you e-File your income tax. |
Equity Remuneration Incentive Scheme (Start-Ups) [ERIS (Start-Ups)]
| Incentives |
Over a period of 10 years, you can enjoy tax exemption of 75% of the gains up to $10 million from options or shares granted within the first three years of incorporation of the qualifying company. |
| How to qualify |
Please refer to the circular on Equity Remuneration Incentive Scheme (Start-Ups) (241KB) |
| How to claim |
If your employer is participating in the Auto-inclusion scheme for employment income, the details of the gains will be sent to IRAS electronically. |
Otherwise, you must submit Appendix 8B (66KB) (details of gains and profits from ESOP/ESOW plans) together with your income tax form or separately if you e-File your income tax.
|
How to report
You need to declare the gains from ESOP/ESOW plans under 'employment income' in your tax form.
If your employer participates in the auto-inclusion scheme
You do not need to report your employment income. Your employer will send us your income details. Check if your employer is a participant of the auto-inclusion scheme.
Find out more about how to submit your tax form.