Proposed change – Tax treatment of stock options

Nicolas de Limbourg 20 July 2012


Stock options aretaxable on the 60th day following the offer if an employee or company director has accepted the offer in writing within 60days following the offer. The taxable option value is generally calculated as a percentage of the market value of the underlying shares on the day prior to the actual offer date or the average closing rate of the stock over the last 30 days prior to the offer date.

A recently introduced proposal to change the law on stock options suggests applying the lump-sum valuation of the taxable benefit on the average closing rate of the underlying shares over the last 150 or 30 days prior to the offer date, excluding the possibility of choosing the closing rate on the day prior to the actual offer. Moreover, the proposal would like to introduce (i) a mandatory forced exercise scheme where 1/3 of the options can be exercised per 30-month period and (ii) a maximum exercise period of 120 months.

In addition the proposal suggests changing the applicable percentage for calculating the taxable benefit in kind and using 18% for all options even if the exercise period exceeds 5 years (which will be mandatory for at least 2/3 of the option grant (see above).  Also the reduced valuation of 9% would become applicable even if the option (1/3 of the grant) is exercised after 30 months (2.5 years).

Whether amendments will be introduced has not yet been decided.  We will keep you informed of the status of the proposal which is currently still pending in the first Chamber of Representatives.