Taxation of Employee Shares

Interested in anyone who knows anything about taxation

of employ shares when moving to or from HK.


Outline

If you have employee shares, Hong Kong will tax in full the

value of the shares when they vest. It does not matter that

these same shares were granted for work carried out in

another country and were perhaps a set portion of your

bonus.


Also it does not matter that the country you are moving from

will also tax the gain on the shares. Because Hong Kong does

not have double tax relief you will end up paying double

taxation.


In addition when you leave Hong Kong, you will be taxed

on shares that have not vested. While the country you

move to will want to tax you on the value when they finally

vest. Again since no other countries have double tax

agreements with Hong Kong you will end up paying double

tax.


The value of the shares at the end of the vesting period are

a result of the initial grant and the possible capital

gains when they finally vest. However, all these gains

will be taxed as income. Often double taxed as income.


Also unless you sell your stocks immediately as the vest,

you can end up owing more tax than the shares are worth.

In the current stock market many people may be now in

this situation, but they do not know it yet.


Because Singapore had double tax agreements this sort

of double taxation does not occur. All up the tax system

in Hong Kong now discourages multinational companies

from setting up here.


Interested to hear about other people's experiences.

The Hong Kong tax law taxing employee shares does not apply if the shares are held for the employee by a Hong Kong-registered retirement plan to which the employee belongs. The shares can be sold tax-free and the plan pays out to the employee tax-free. For details, contact Shane Weir of Weir & Associates, solicitors tel: +852 2526 1767 for HK$2,500 one hour consultation.


Weir & Associates

Solicitors & Notaries

16th Floor Tak Shing House

Theatre Lane

20 Des Voeux Road Central

Central

Hong Kong

Tel : 2526-1767

Fax : 2868-3568

email : weirlaw@hongkonglaw.com

www.HongKongLaw.com/weirlaw