This month, the Belgian tax authorities submitted a bill to Parliament concerning the taxation of stock options. The bill is intended to help Belgian employees who were taxed on stock options at the time of grant. Under the current Belgian tax regime for options, employees are subject to tax at grant if they formally accept the option within 60 days of the offer date. The taxable event may be deferred until exercise if the employees formally accept the option after the 60-day period following the offer.
Because many stock options are underwater, employees may not be able to exercise the options before they expire. This situation creates a problem for the Belgian employees who were taxed at grant because they cannot realize the tax-exempt capital gain on the option, and cannot recover the tax they paid at grant.
Under the bill, companies may extend the option term for up to five years from the option expiration date without any individual tax penalties. Without the bill, such an extension of the option term would result in a new tax to the employees because the extension of the option term is considered the grant of a new option. The new option would be subject to tax at grant.
In order to be eligible for the extension of the option term, the option must have been granted between Jan. 1, 2003 and Aug. 31, 2008. In addition, the total value of the options granted to the employee by the company may not exceed EUR 100,000.