4 ms·
It seems like the author didn't understand the landscape. Isn't their description of Germany basically consistent with the US (e.g. California)? > When employe
by Myrmornis 7y ago
It seems like the author didn't understand the landscape. Isn't their description of Germany basically consistent with the US (e.g. California)?
> When employees in Germany exercise options, they have to pay income tax on the difference between the fair market value and the strike price, and that rate runs from 14% to 47.5%. They also have to pay a 25% capital-gains tax on additional profits when they sell their shares.
And their description of the US is misleading. One always has to pay tax at exercise, just like in Germany.
> In contrast, American employees typically pay a 0% to 20% rate on capital gains when options are redeemed, though they may have to pay additional levies when they’re exercised, depending on the timing and the type of equity incentive program.
- marcinzm 7y agoDoesn't exercising an option in the US count against Alternative Minimum Tax but not regular taxes? And doesn't AMT have an exemption amount so you don't pay taxes if you're below it? edit: Also, does the fair market value in Germany "undervalue" startups the same way the 409A valuation does in the US? If not then that would increase the taxable amount by a lot and also lowers the upside since it increases the strike price.
- Myrmornis 7y ago> Doesn't exercising an option in the US count against Alternative Minimum Tax but not regular taxes? And doesn't AMT have an exemption amount so you don't pay taxes if you're below it? Not in my experience. Basically it ends up that the difference between exercise and strike is taxed as income.