This system also applies to stock options granted by non-French issuing companies [1].

Employee stock options at risk of crossborder double taxation – Hanson Crossborder Tax Inc.

The advantage for the employee or manager is that they can acquire, on the day the option is exercised 2 , shares at a lower price than the market price. When the employee or manager exercises the option and pays the price, he or she becomes a shareholder and thus realizes an acquisition gain difference between the value of the shares on the day the option is exercised and the price paid.

The taxation of this acquisition gain is deferred until the year the shares are sold.

When selling the shares, the employee then realises a gain capital gain or a loss capital loss on the sale difference between the sale price of the shares and their value on the exercise date. This capital gain is taxed for the year in which the sale of the shares takes place. If there is a capital loss on disposal, it will be deducted from the exercise gain for the year and will reduce its taxable base.

Part I: US Tax Treatment: Stock Options from Your Foreign Employer

In applying the "small number exemption" rule or the "small amount exemption" rule, a certain aggregation is made with respect to determining whether the foregoing thresholds are satisfied. The exact operation of such aggregation rules is very complicated and is not covered in this general memorandum. Where the granting of the Options is exempted from the registration requirement pursuant to the small number exemption or the small amount exemption discussed in Section 2 above, the Company may still be required to file a securities notice in either of the following cases:. A securities notice is a much simpler document than a securities registration statement.

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Unlike a securities registration statement, the filing of a securities notice will not subject the Company issuer to continuous disclosure obligations discussed in Section 2 above. A Japanese Employee who has exercised and paid for the Option will be required to submit to the Minister of Finance the "MOF" a "report of acquisition of shares" within twenty 20 days if the aggregate issue price of the shares at one time exceeds one hundred million ,, yen.

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In addition, a Japanese Employee who has exercised and paid for the Option is required to submit to the MOF a "report of payment for the acquisition of shares" within ten 10 days if the amount paid by the Japanese Employee exceeds five million 5,, yen. The Company issuer itself is NOT required to file any notification or report with the MOF in respect of the granting of the Options nor the issuance of new shares.

Offering Shares to Overseas Employees: A Guide for Employers

The grant of Options will generally not result in taxable income for the Japanese Employees if the exercise price equals the market price of the Shares at the time of the grant. However, a Japanese Employee would be subject to Japanese income tax as salary income at the time of the exercise of the options on the value of the "discount" i. In this topic, we have assumed that: i the Shares of the Company are neither listed on any stock exchange in Japan nor registered with the Japan Securities Dealers Association for over-the-counter trading nor otherwise subject to continuous disclosure requirements under the SEL; ii the Shares to be acquired by the Japanese Employees are newly issued shares of common stock of the Company; iii Japanese subsidiaries will not intervene in the implementation of the stock option plan nor will bear any costs relating to the Options and iv Japanese Employees are residents of Japan under the FEL and permanent residents of Japan pursuant to Japanese tax laws.

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General Registration Requirements Under the SEL, granting by a foreign corporation the "Company" of its stock options the "Options" to employees of its Japanese subsidiaries the "Japanese Employees" generally constitutes an offering of securities at the time of such granting. Registration Requirement Exemptions Notwithstanding the general registration requirement, the Company will not be required to file a securities registration statement, if either of the following exemptions is available: a the number of the prospective optionees under the stock option plan is less than fifty 50 sometimes called the "small number exemption" ; or b the aggregate issue price i.