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Taxation of Stock Options

Taxation of Incentive Stock Options (ISOs)

ISOs offer employees a very convenient tax treatment. If all the conditions for ISOs are fulfilled, employees are not taxed when they receive or exercise the options, but only when they sell the shares. When the shares are sold, employees are generally liable for a capital gains tax of 20% if the shares were held for at least two years from the date of grant of the options and at least one year from the date of exercise of the options (in any other case, employees are liable for ordinary income tax according to their respective tax brackets).

For an option to be recognized as an ISO, the following conditions have to be fulfilled:


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