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The problem in Sweden at least is that you need to pay this tax before you can even sell your stocks. So basically you have no money to pay the taxes with.

by Kiro 7y ago

LunaSea 7y ago
Same in Belgium.
- sokoloff 7y ago
  With alternative minimum tax, even an exercise-and-hold of ISOs can have the same issue (on a smaller scale due to the lower rates) in the US.
hn_throwaway_99 7y ago
But, to be honest, that's really not that much different than in the US. While you hear a lot about incentive stock options (ISOs) in the US not being taxed until you sell them, in reality most people who exercise ISOs will have to pay alternative minimum tax (AMT, a kind of parallel tax scheme to 'normal' taxes) when they exercise. When I exercised my options I had to pay more in tax than I did for the exercise price of the options themselves.
jakelazaroff 7y ago
Isn’t this often true in the US as well? You pay to exercise your stock options, and then pay taxes on them (since they’re income). But if your company is still private, they’re basically illiquid.
jsjolen 7y ago
Really? Could you link me to Skatteverket where it says this? The only info I find is that you tax when you sell your stock. I read most of this: https://www.skatteverket.se/privat/skatter/vardepapper/omaktier.4.50a6b4831275a0376d380001915.html https://www.skatteverket.se/privat/skatter/vardepapper/omakt...
- Kiro 7y ago
  I'm talking about employee stock options. Google "personaloptioner". When you exercise the options and get stocks you need to pay taxes on the difference between the strike price and the market value, even if you have no possibility to sell the stocks (if the company is private for example).
  - danans 7y ago
    > When you exercise the options and get stocks ... even if you have no possibility to sell the stocks Why exercise the options if you have no ability to sell them? The risk of unexercised options is totally on the employer who granted the options. For the employee, holding the option itself is likely a lower risk strategy than exercising and holding the illiquid stock.
    - Kiro 7y ago
      You have an expiration date. I had to exercise or I would lose them.
tyfon 7y ago
That's not really true for Norway. When I received my stock options for the company I paid no taxes at all. When I exercised them I got a tax hit, but that had to be paid like six months later so there was no issue selling enough stock to pay the tax. Another funny thing about wealth creation. Norway and Sweden has more dollar billionaires pr capita than the US [1]. [1] https://en.wikipedia.org/wiki/List_of_countries_by_the_number_of_billionaires https://en.wikipedia.org/wiki/List_of_countries_by_the_numbe... (sort the list by Population pr one billionaire).
- bruun 7y ago
  This works if you are in a position to sell the stock to pay the tax. If the company is not publicly traded you need to find a buyer, and because you really need that money before the tax returns you might have to sell at a lower price than the one you were taxed on, if you can find one at all. This makes it harder for startup employees to exercise their stock options before an exit or the company going public, unless they already have cash at hand. Source: Have exercised stock options in a Norwegian startup. I was lucky enough to have enough cash at hand to pay the tax.
  - dalyons 7y ago
    Same as the US. You pay tax on the valuation difference when you exercise. and AFAIK you have to exercise before you sell on any primary or secondary market.
  - tyfon 7y ago
    I didn't exercise until we did the IPO, but yeah it might be a problem. I wouldn't exercise unless I knew I could sell it of course, then I'd be in a pickle or would have had to borrow until I could sell!
- cameldrv 7y ago
  The topic though is not really about billionaires, which generally are the founders of the company. It's about the much larger number of multimillionaires that got their money from stock options on IPOed companies. There are far fewer of those in Europe.

The problem in Sweden at least is that you need to pay this tax before you can even sell your stocks. So basically you have no money to pay the taxes with.

by Kiro 7y ago

The problem in Sweden at least is that you need to pay this tax before you can even sell your stocks. So basically you have no money to pay the taxes with.

LunaSea 7y ago

Same in Belgium.

sokoloff 7y ago
With alternative minimum tax, even an exercise-and-hold of ISOs can have the same issue (on a smaller scale due to the lower rates) in the US.

hn_throwaway_99 7y ago

But, to be honest, that's really not that much different than in the US. While you hear a lot about incentive stock options (ISOs) in the US not being taxed until you sell them, in reality most people who exercise ISOs will have to pay alternative minimum tax (AMT, a kind of parallel tax scheme to 'normal' taxes) when they exercise. When I exercised my options I had to pay more in tax than I did for the exercise price of the options themselves.

jakelazaroff 7y ago

Isn’t this often true in the US as well? You pay to exercise your stock options, and then pay taxes on them (since they’re income). But if your company is still private, they’re basically illiquid.

jsjolen 7y ago

Really? Could you link me to Skatteverket where it says this? The only info I find is that you tax when you sell your stock. I read most of this: https://www.skatteverket.se/privat/skatter/vardepapper/omaktier.4.50a6b4831275a0376d380001915.html https://www.skatteverket.se/privat/skatter/vardepapper/omakt...

Kiro 7y ago
I'm talking about employee stock options. Google "personaloptioner". When you exercise the options and get stocks you need to pay taxes on the difference between the strike price and the market value, even if you have no possibility to sell the stocks (if the company is private for example).
- danans 7y ago
  > When you exercise the options and get stocks ... even if you have no possibility to sell the stocks Why exercise the options if you have no ability to sell them? The risk of unexercised options is totally on the employer who granted the options. For the employee, holding the option itself is likely a lower risk strategy than exercising and holding the illiquid stock.
  - Kiro 7y ago
    You have an expiration date. I had to exercise or I would lose them.

tyfon 7y ago

That's not really true for Norway. When I received my stock options for the company I paid no taxes at all. When I exercised them I got a tax hit, but that had to be paid like six months later so there was no issue selling enough stock to pay the tax. Another funny thing about wealth creation. Norway and Sweden has more dollar billionaires pr capita than the US [1]. [1] https://en.wikipedia.org/wiki/List_of_countries_by_the_number_of_billionaires https://en.wikipedia.org/wiki/List_of_countries_by_the_numbe... (sort the list by Population pr one billionaire).

bruun 7y ago
This works if you are in a position to sell the stock to pay the tax. If the company is not publicly traded you need to find a buyer, and because you really need that money before the tax returns you might have to sell at a lower price than the one you were taxed on, if you can find one at all. This makes it harder for startup employees to exercise their stock options before an exit or the company going public, unless they already have cash at hand. Source: Have exercised stock options in a Norwegian startup. I was lucky enough to have enough cash at hand to pay the tax.
- dalyons 7y ago
  Same as the US. You pay tax on the valuation difference when you exercise. and AFAIK you have to exercise before you sell on any primary or secondary market.
- tyfon 7y ago
  I didn't exercise until we did the IPO, but yeah it might be a problem. I wouldn't exercise unless I knew I could sell it of course, then I'd be in a pickle or would have had to borrow until I could sell!
cameldrv 7y ago
The topic though is not really about billionaires, which generally are the founders of the company. It's about the much larger number of multimillionaires that got their money from stock options on IPOed companies. There are far fewer of those in Europe.