EMPLOYEE SHARE OPTION SCHEME (Review of tax implications)

[Mr Speaker in the Chair]

Mr Chew Heng Ching asked the Minister for Finance if his Ministry will review the tax implications of the Employee Share Option Scheme to make the scheme more attractive to employees.

The Minister for Finance (Dr Richard Hu Tsu Tau): Mr Speaker, Sir, under our current tax system, when an employee exercises his share option and a gain is realised, the gain is taxable as an employment benefit in the same way as other forms of income such as salary. The taxable benefit would be the difference between the exercise price of the shares and the market price of the shares when issued to the employee.

Our tax treatment of employee share options is similar to that in Hong Kong, US and UK which also impose tax at the point of exercise. However, the US and UK have qualified/approved share option schemes in which tax is levied at the point of sale as capital gains at the capital gains tax rate, which is different from the above tax rate. But such capital gains schemes are not applicable in Singapore as we do not tax gains on capital.

However, the Ministry of Finance is studying possible options to facilitate the use of employee share options to promote entrepreneurship, and this is something which we will do over the next few months.

Mr Chew Heng Ching (East Coast): I wish to ask the Minister when will this study be completed. He mentioned "over the next few months".

Dr Richard Hu Tsu Tau: I do not wish to give the Member a promise at this stage. But we will do it within a reasonable period.