In most European countries, employee share options are taxed on the amount of gain which accrues at the date of exercise i.e. the market value of the shares less any exercise price payable.
An exception to this has been the Netherlands where options have been taxed at the time they become "unconditional" (basically, the date they mature which may, subject to the terms of the option, be anywhere between the date of grant and the date of exercise). The amount of tax payable is assessed on two elements:
- The "intrinsic value" of the option - the market value when the option becomes unconditional, less the exercise price; plus
- The "expectancy value" - a statutory formula which assesses the capacity for future growth in the share price which is based on the remaining term after the option matures and its intrinsic value.
