Today, THAI ACCOUNTANT answers a question from one of our payroll clients regarding the options to buy stocks of a parent company by employees of a Thai affiliate company.
As employees of a Thai affiliate company of an overseas parent company in the USA, it is stated in the terms of our employment that we have an option to purchase stocks of the parent company at a price lower than the market price. When we use this option to buy the stocks, will we be required to pay for tax?
An option to purchase stocks of the parent company at a price lower than the
market price is considered assessable income derived from employment within Thailand (income under Section 40 (1) of the Revenue Code), and considered as income derived from the posts in Thailand under Section 41, first paragraph. Therefore, you shall include the benefits received from the purchase of stocks at a price lower than market price as your assessable income for personal income tax purpose. The assessable income of Thai employees derived from the purchase of stocks of a parent company (these are shares which are not publicly traded in the Stocks of Exchange of Thailand) is calculated from the market value of the stock less the exercise price of the stocks on the day ownership is
transferred to the employees.
Furthermore, any contributions the Thai affiliated company made to the purchase of stocks in the parent company as part of the scheme are considered as benefits from the employment under Section 40 (1) of the Thai Revenue Code, and are thus required to be included as assessable income for the purpose of calculating personal income tax.
More to consider:
Gains derived from the sale of shares on a stock exchange in the USA are assessable income under Section 40 (4) (b) and are regarded as overseas sourced income, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the proceeds are brought into Thailand in the same year they were received, in accordance with Section 41, second paragraph.
When you received dividends on the shares acquired from the exercise of the stock options, it is also considered as overseas sourced income, according to Section 41, second paragraph, and therefore subjected to Thai income taxes if you are considered to be a Thai tax resident and the income was brought into Thailand in the same year the dividend was paid.