Japan equivalent of 83(b). Startup stock options
Posted: Thu Dec 05, 2019 2:35 am
I work for an american startup. They just said that I'm getting stock options and that I should file an 83(b) to reduce tax at sale time.
Im not a US citizen and live and pay tax in japan.
According to here:
https://www.quora.com/How-do-you-file-a ... cted-stock
Related: https://www.cooleygo.com/what-is-a-sect ... -election/
Im not a US citizen and live and pay tax in japan.
According to here:
https://www.quora.com/How-do-you-file-a ... cted-stock
Which is fine, I don't pay tax in the US anyhow, but the advantages of the 83(b) look exceptional, paying tax on the initial price rather than the sale price....First of all, foreigners technically don't need to file an 83(b) since they are not liable for US taxes. If there is no chance that those foreign founders will ever live in the US during the vesting period, you can safely forego the 83(b)...
Related: https://www.cooleygo.com/what-is-a-sect ... -election/
So my question is: Is there any similar japanese tax system to pay the tax on the received price rather than the sale profit?Two Simple Examples
In each of the below examples, assume you receive 100,000 shares subject to vesting, worth $.01 per share at the time of grant, $1.00 per share at the time of vesting, and $5.00 per share when sold more than one year later. We’ll also assume you are subject to the maximum ordinary income tax rate and long-term capital gains rate. For simplicity, we will not discuss the employment tax or state tax consequences.
Example 1 – 83(b) Election
In this example you timely file a Section 83(b) election within 30 days of the restricted stock grant, when your shares are worth $1,000. You pay ordinary income tax of $396 (i.e., $1,000 x 39.6%). Because you filed a Section 83(b) election, you do not have to pay tax when the stock vests, only on the later sale. On the later sale which occurs more than one year after the date of grant you recognize a taxable gain of $4.99 per share (not $5.00, because you get credit for the $.01 per share you already took into income), and pay additional tax of $99,800 (i.e., $499,000 x 20%). Your economic gain after tax? $399,804 (i.e., $500,000 minus $396 minus $99,800).
Example 2 – No 83(b) Election
In this example you do not file a Section 83(b) election. So you pay no tax at grant (because the shares are unvested), but instead recognize income of $100,000 when the shares vest and thus have ordinary income tax of $39,600. On the later sale which occurs more than one year after the date of vesting you recognize a taxable gain of $4.00 per share (not $5.00, because you get credit for the $1.00 per share you already took into income), and pay additional tax of $80,000 (i.e., $400,000 x 20%). Your economic gain after tax? $380,400 (i.e., $500,000 minus $39,600 minus $80,000).