Holding ESOS? New Taxation Under Budget 2006

If you are holding option under Employee Shares Option Schemes (ESOS) or will get them, maybe you should aware that probaly starting on 1 Jan 06 there will change in ESOS taxation. This is as the proposal under 2006 budget.

Under the current rules, if the employee exercises his options at a time when the market price of the shares is lower than the exercise price, he is still subject to tax based on the 10% difference. And this gonna change after the ammendment.

From the Star 15 Oct 05:
"It is a much-debated issue in the United States and Europe, but it looks inevitable that Malaysia will adopt this practice come Jan 1.

This development will force a rethink on how listed companies structure and justify their Esos. It has been a no-brainer to give out share options. There is no impact on the companies' earnings and employees are kept happy, provided the company's shares are doing well. 
The only potential problem is that shareholders may protest the dilution of their shareholdings, but that is a rare occurrence. The authorities took things a step further by allowing non-executive directors to participate in Esos. 

This is set to end. The expensing of share options brings a whole array of challenges and will put Esos under closer scrutiny."

Go to star biz news (click here) to read the article.