Gains from Employee Share Options (ESOP) / Other forms of Employee Share Ownership (ESOW)

Gains and profits arising from Employee Share Options (ESOP) and other forms of Employee Share Ownership (ESOW) are subject to tax.

i. Employee Share Option (ESOP)

ESOP plans give the employee the rights to purchase shares in the company at a specific pre-determined price within a time frame.

An employee who is granted share options by an employer will be taxed on any gains or profits arising from the exercise of the share option.

    ii. Other Forms of Employee Share Ownership (ESOW)

    ESOW plans 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).

    An employee who is granted ESOW by the employer is subject to tax on any gains or profits when the ESOW plan vests on the employee. 

    This applies to ESOP/ESOWs:

    a) Granted by an overseas parent company operating a group ESOP/ESOW plan; or

    b) Granted to a person as a result of any office held by him (e.g. a director).

    When Tax is Payable on ESOPS and ESOWS

    ESOW Plans with No Vesting Imposed

    The gains are taxable in the year when the shares are granted.

    ESOP/ESOW Plans Granted with Vesting Imposed while you are exercising employment in Singapore

    Granted on or after 1 Jan 2003

    The gains or benefits from any ESOP/ESOW plans are taxable in Singapore.
    This is regardless of where you exercise the ESOP or the ESOW plan vests, as the gains will be taxed to the extent that they are connected with your employment in Singapore.

    The gains are taxable even when you exercise the ESOP or the ESOW vest after your employment in Singapore has been terminated or you are posted overseas.

    The gains or benefits 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 employed in Singapore.

    ESOP/ESOW Plans Granted with Vesting Imposed while you are NOT exercising employment in Singapore

    This does not apply if you were temporarily away, as such absence from Singapore would be treated as incidental to your employment in Singapore.

    Exercised or vested on or after 1 Jan 2002

    The gains or benefits from any ESOP/ESOW plans are not taxable in Singapore

    The gains or benefits 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 employed in Singapore.

    How Gains are Taxed

    Gains from ESOW plans with no vesting imposed

    The gains are taxable in the year when the shares are granted.

    Gains from ESOP/ESOW plans with vesting imposed

    Granted on or after 1 Jan 2003

    ESOP/ESOW plans

    Granted on or after 1 Jan 2003

    Without selling restriction

    Taxable in the year when

    • you exercised the ESOP or
    • the shares under ESOW plan is vested on you

    With selling restriction (moratorium)

     Taxable in the year when the selling restriction is lifted

    ESOP/ESOW plans

    Granted before 1 Jan 2003

      

    Without selling restriction

    Taxable in the year when

    • you exercised the ESOP or
    • the shares under ESOW plan is vested on you
      

    With selling restriction (moratorium)

      

    For foreigners and Singapore permanent residents (SPRs)

    Deemed exercise rule  applies when you terminate your employment or leave Singapore permanently.

    How Gains are Computed

    Without Selling Restriction

    Gains from ESOP = Open market price of share on date of exercise less price paid for the shares (exercise price)

    Gains from ESOW plan (with vesting imposed) = Open market price of share on date of vesting less price paid for the shares

    Gains from ESOW (with no vesting imposed) = Open market price of share on date of grant less price paid for the shares

    Mr Lim exercised his share options. Below is the amount of his ESOP gains:

    Open market price per share on date of exercise
    (a)

    $10

    Exercise price per share
    (b)

    $5

    Number of shares acquired
    (c)

    100

    Gains from ESOP
    [(a) - (b)] x (c)

    500

    With Selling Restriction (Moratorium)

    Open market price of the shares on the date the selling restriction is lifted less exercise price of the shares = Taxable gain

    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 five years

    The deferred tax is subject to an interest charge.

    How to qualify

    Please refer to the e-Tax Guide on Tax Treatment of Employees on Share Options and Other Forms of Employee Share Ownership Plans (Second Edition) (582KB)

    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 Apr, together with your income tax form or separately if you e-File your tax return.

    Alternative payment

    If you do not wish to apply for the tax deferment scheme, you may pay your taxable gains from ESOP/ESOW plans via GIRO instalments .
    Please contact us for more information on our GIRO instalment scheme

    Equity Remuneration Incentive Schemes (ERIS)

    As announced in the Budget Statement 2013

    Applies to:

    Stock options or shares granted from 16 Feb 2008 to 15 Feb 2013 (both dates inclusive). The grant date must be within the first three years of the company's incorporation.

    Tax Incentives:

    You can enjoy tax exemption of 75% of the gains arising from ESOP or ESOW plans. Tax exemption is available for each YA over a period of ten years, subject to qualifying criteria.

    The accumulative gains on which the tax exemption applies are capped at $10 million over the ten-year period and the gains must be derived on or before 31 Dec 2023.

    ERIS (SMEs) was previously known as Entrepreneurial Employee Equity-based Remuneration Scheme.

    Applies to:

    1. Stock options granted from 1 Jun 2000 to 31 Dec 2013 (both dates inclusive) under any ESOP plans; or
    2. Shares granted from 1 Jan 2002 to 31 Dec 2013 (both dates inclusive) under any ESOW plans.

    Incentives:

    You can enjoy tax exemption of 50% of the gains arising from ESOP or ESOW plans. Tax exemption is available for each YA over a period of ten years, subject to qualifying criteria.

    The accumulative gains on which the tax exemption applies are capped at $10 million over a ten-year period and the gains must be derived on or before 31 Dec 2023.

    ERIS (All Corporations) was previously known as Company Employee Equity-based Remuneration Scheme.

    Applies to:

    1. Stock options granted from 1 Apr 2001 to 31 Dec 2013 (both dates inclusive) under any ESOP plans; or
    2. Shares granted from 1 Jan 2002 to 31 Dec 2013 (both dates inclusive) under any ESOW plans.

    Incentives:

    You can enjoy full exemption on the first $2,000 gains, plus exemption of 25% of the remaining amount of gains from ESOP or ESOW plans. Tax exemption is available for each YA over a period of ten years, subject to qualifying criteria.

    The accumulative gains on which the tax exemption applies are capped at $1 million over the ten-year period and the gains must be derived on or before 31 Dec 2023.

    Qualifying for ERIS

    For details, please refer to the e-Tax Guide on Equity Remuneration Incentive Scheme (ERIS) (Second Edition) (535KB)

    Use the ERIS Calculator (288KB) to check the eligibility for partial tax exemption under ERIS.

    Reporting Gains to IRAS

    If your employer is participating in the Auto-Inclusion Scheme, you do not need to report your employment income. Your employer will send us your income details electronically. Check if your employer is participating in the Auto-Inclusion Scheme .

    If your employer is not participating in the Auto-Inclusion Scheme, you need to declare the gains from ESOP/ESOW plans under 'Employment Income' in your tax form. You must submit Appendix 8B (87KB) (details of gains and profits from ESOP/ESOW plans) together with your income tax form or separately if you e-File your income tax.

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