Research On Individual Income Tax Law System Of Employee Stock Option

In the management of modern enterprises,employee stock option is a kind of effective long term incentive tolls.Under the employee stock option system,the employee stock option revenue of employees is linked to the stock price tightly.The stock price is usually viewed as the value of the stock and the value of the stock is based on the inner value of the enterprise,so the implementation of stock option could associate employee’s revenue to the development of company.When the employee is the managerial personnel,the motivation of stock option could coordinate the conflict between the managerial personnel and the company.In the early years of the implementation of stock option,the motivated employee were the managerial and technical personnel in the company,and the motivated employee are all of the employees now.In order to incentive the employee and increase the value of the company,more and more conmpanier adopt the stock option now.The stock option cover a lot of materials,and the individual income tax law system of employee stock option is the very important impact..Whether the treatment of the individual income tax of employee stock option is fairness relate to the incentivation of stock option and effect the development of the stock option system.When the employee take the stock option,he can buy the stocks in a price which is lower than the market price on the exercise date,but the employee do not get the income actually.In the process of stock holding,the employee may get income because of dividend distribution in the company. The employee could get income on the selling date when the stocks are sold and these incomes constitute the whole incomes of the authorized employee.According to the current tax law,revunue got on the exercise date belong to income from wages and sallies which should be taxed.The revenue got because of stock holding belong to the dividend and the revenue got because of stocks selling belong to income from transfer of property.These revenue should be taxed.Now, the individual income tax of employee stock option is not perfect,exists some situations which deviate from the equity of tax.Inorder to promote the development of the employee stock option,it is necessary to fair the current policy,which could make the burden of individual income tax of employee more fairness.In this article,stock option is explained and its legal characteristics and narure is discussed.The advantages which exercising stock option are discussed from two aspects which are company management and income revelution.then, individual income tax of employee stock option is explained and the theory of tax equity is discussed in our country.As unfairness exists individual income tax of employee stock option,so this aiticle analyzes the situation of individual income tax of employee stock option in our country and indicates some performences which deviate from tax equity.Two performences are contained,one is the tax burden under the same income and the other is the tax burden under the different income.As for the former,publict company and private company are analyzed in the aspect of different tax policy used on stock option. Publict company in our country and publict company not in our country are also analyzed in the aspect of different tax policy used on stock option. The tax burden is analyzed when different employees choose different exercising dates.As for the latter, individual income tax of employee stock option do not consider different vesting period and locked-in period.What’s more,the effect imposed by stock market on the stock price of public company in our country is not reflected in the current policy.Imperfection on current policy is the directed reason which causes a lot of unfairness.Moreover, the pattern of individual income tax is closely related to these unfairness.In this article,tax policy of stock option in America is analyzed in order to seek some highlights for fairing our tax policy.These highlights are composed of sort management for stock option and moderate concessions on tax rate.Based on the unfairness on our policy and taking the example of the policy in Ameicia,there are four aspects to fair tax burden in our country.Firstly,based on the consideration of legislation,the level of the tax policy should be promoted,and legislative taxation should be put into practice.Secondly,concrete system should be perfected.Concrete goals for fairing the burden of employees should be clear.The same income should be equally treated and the different income should be treated differently.It is necessary to unify the system between pubile company and private company, between public company in our country and public company not in our country. It is also necessary to eliminate unfairness tax burden caused by choosing exercise date artificially.In addition, It is necessary to consider the vesting period,locked-in period and stock market when fairing tax burden.Then,baded on these goals,some suggestions are proposed to fair the tax.Three aspects could be considered,that is,moderate concessions for stock option,comfirm of the basis for computation of tax,tax rate,vesting period and locked-in period.Because the employee’s tax burden belongs to the whole individual income tax system,fairing the employee’s tax burden should be linked to the classified and comprehensive revolution of individual income tax.Some other factors should be considered such as related laws,promotion of taxpayer’s consciousness.The four suggestions above may provide ideas in fairing individual income tax of employee stock option and may promote the development of stock option in our country.