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Summary: Which country is the most favorable for exercising US stock options?
After being a part of a startup for more than two years, I'm finally set to receive a stock options grant agreement next week. The agreement includes accelerated vesting from my joining date and a strike price that reflects the company's value at that time. The 409a valuation was delayed for several months, but it was recently completed, valuing the company at $22 million.
As per my recent reading of several sources in the UK, it appears that for "Unapproved share options," the tax liability arises at the time of exercise rather than the grant. The tax is levied on the difference between the strike price and the Actual Market Value (AMV).
So, does this imply that the Actual Market Value (AMV) is $22 million?
Moreover, if I exercise my options now, would that imply that my tax liability on exercise would be based on the following calculation:
Actual Market Value of 50,000 shares (out of a total of 1 million shares valued at $22 million) = $1,100,000.
Does this imply that my tax liability would be a staggering 450,000 pounds, considering the 45% tax rate on any amount exceeding 150,000 pounds?
In such a scenario, wouldn't it be more practical to register as a Limited Company and incur only 19% income tax?
Additionally, I have been residing in the UK for the last seven years and have obtained a settled status here, but I hold Polish citizenship. Based on my research, there is no tax obligation on exercising stock options in Poland, only on the eventual sale of such assets.
In light of this, would it be advisable for me to go back to my home country to exercise the options (and subsequently spend five years there, as I wouldn't be able to return to the UK)?
After being a part of a startup for more than two years, I'm finally set to receive a stock options grant agreement next week. The agreement includes accelerated vesting from my joining date and a strike price that reflects the company's value at that time. The 409a valuation was delayed for several months, but it was recently completed, valuing the company at $22 million.
As per my recent reading of several sources in the UK, it appears that for "Unapproved share options," the tax liability arises at the time of exercise rather than the grant. The tax is levied on the difference between the strike price and the Actual Market Value (AMV).
So, does this imply that the Actual Market Value (AMV) is $22 million?
Moreover, if I exercise my options now, would that imply that my tax liability on exercise would be based on the following calculation:
Actual Market Value of 50,000 shares (out of a total of 1 million shares valued at $22 million) = $1,100,000.
Does this imply that my tax liability would be a staggering 450,000 pounds, considering the 45% tax rate on any amount exceeding 150,000 pounds?
In such a scenario, wouldn't it be more practical to register as a Limited Company and incur only 19% income tax?
Additionally, I have been residing in the UK for the last seven years and have obtained a settled status here, but I hold Polish citizenship. Based on my research, there is no tax obligation on exercising stock options in Poland, only on the eventual sale of such assets.
In light of this, would it be advisable for me to go back to my home country to exercise the options (and subsequently spend five years there, as I wouldn't be able to return to the UK)?