Retaining key personnel has always been a company’s prerequisite policy paving the way to prosperity. Employee Stock Ownership Plan (ESOP) has long been considered a good management tool and compensation benefit for the retention of human capital, as well as a good solution for those companies with limited cash flow. While ESOP is not a new term, its important tax implications have been continuously provoking controversy. This report investigates the Personal Income Tax (PIT)’s exposure under ESOP schemes, which provide beneficiaries a better understanding and thus the ability to minimise tax risks. Grant Thornton Vietnam provides insights into the tax side of ESOP Employee Stock Ownership Plan (ESOP) ESOP can simply be understood as employees’ benefit plan with agreed terms and conditions. An employee stock ownership is defined as an allocation of shares that will be granted to specified employees in the future, prevalently in the form of shares options and/or shares ownership. Under such a scheme, employees typically must wait for a vesting period to elapse before they are granted an ownership or a right to exercise the option, and buy the company shares at a lower strike price than that of the prevailing market. Employee ownership can be accomplished in a variety of ways in which employees can buy shares directly, be allocated shares as a bonus, receive shares options or obtain shares through a profit sharing plan, among others. The general stages of an employee incentive plan include: – Formulation: Employer plans and creates a strategy to… [Read full story]
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