An employee share option gives the employee the opportunity to buy a number of shares, at an agreed upon price (usually lower than market) within a certain timeframe. ESOs can benefit both employees and employers. For the employer, the ESO can be a strategic weapon for growth. The employee can reap some of the financial benefits of a successful business. This thesis analyzes the taxation of different types of ESOs, focusing on selected issues including an analysis of the legal acquisition date and the ongoing legal practice in this field. The valuation of unlisted shares will be analyzed and in conclusion, different valuation models will be explained, including an analysis of their applicability. However, there are a number of ambiguities in relation to the conditions that have be met, before section 7 P can be used for tax benefit purposes. This thesis will analyze the individual conditions that have to be met before section 7 P can be applied. It is concluded that the final legal acquisition date for conditional shares, options and warrants is dependent on, whether or not there is any uncertainty regarding the fulfillment of the condition linked to the conditional shares. Several conditions have to be met before the ESO is in compliance with the favorable tax treatment in section 7 P. Furthermore, it is concluded that the binomial model is more suited for the valuation of conditional shares. One of the strengths of the binomial model is that it is possible to incorporate qualitative conditions, making the model more realistic than the Black-Scholes model. When using valuation models that include the volatility parameter, there is some uncertainty regarding the calculated value of an option or warrant, when the underlying share is unlisted. One of the reasons for this, is that when the shares are unlisted, there are no historic share prices to estimate the volatility and therefore the volatility is estimated by comparing share prices of companies in the industry.
|Educations||MSc in Auditing, (Graduate Programme) Final Thesis|
|Number of pages||62|