The difference of the tax laws are quite tricky when you handle the monetary rewards like stock options for your team members spreading many locations over the globe. Now, here is a bit of your must-check-items especially important in Japan’s tax related regulations.
Options Adoptive
to the local tax law- Same percentage of tax that is applied to your capital gain.
- In Japan, they call it “separate taxation”. The tax amount is specifically calculated for your capital gain.
- For more detailed information, please consult with your accountant.
Options non-Adaptive
to the local tax law- Same percentage of tax rate as salary income (above 9M JPY, it will become 43%)
- They call it “Comprehensive Taxation”.
- 33% of the income tax plus 10% local tax
- Ideally, the options should be adoptive one in order to avoid this high tax rate.
Based on these difference that comes from the local tax regulation, maybe you have to design your stock options so as to make it “adoptive” to the local tax low. The “tax-law-adoptive” stock options must comply with following rules.
Rules to comply in order to make your options “Tax Adoptive” with Japanese regulations
Cliff
Longer than 2 years of the non-vesting period.
Capital Gain
There is upper limit. Should be less than 12M JPY annually.
Receiver
Need to be your employee. Should not be your spouse or relative.
Strike Price
The Strike Price should be higher than then-current stock price.
Given for FREE
That stock option must be granted for free.
Non-Transferable
Stock option should be stated as “Non-Transferable” on your contract.
Work with
Your accountant might clarify all of your worries but in case you need help, feel free to inquire!
