What regulatory requirements apply to stock options offered to an employee?

Regulatory and tax requirements for stock options are determined by two factors:

• The country where the issuing company (client) is incorporated
• The country where the employee is a resident

Taxable events

There are five taxable events: granting, vesting, exercising, holding and selling. The majority of applicable tax events come from vesting and exercising. While selling is a taxable event trigger, in most cases, the responsibility falls on the employee to report it since it is no longer considered employment income. Different types of equity incentives (NSO, RSU/RSA, VSO) have different tax implications. 

Reporting, withholding and remitting taxes

Almost every country has reporting and withholding obligations. In most jurisdictions, Remote, as the legal employer of record, must report the applicable taxes, withhold them from the employee, and remit the withheld funds to the applicable tax authorities. In a few jurisdictions, the client may be responsible for reporting and/or withholding. 

You’ll need to work with tax and legal experts to advise you on the rules that apply to the issuing company. We can help you understand local rules that apply to team members, including detailed information on local tax and regulatory requirements.