Share Options and Equity Compensation for Internationally Mobile Employees

Introduction

Share options, restricted stock units (RSUs), performance share plans (PSPs), and other equity-based compensation are increasingly central to the remuneration packages of senior executives and high-value employees in multinational organisations. When these employees are internationally mobile — living and working in different countries at various stages of the vesting cycle — the tax treatment of their equity compensation becomes a complex, multi-jurisdictional problem.

The core challenge is that equity awards are typically granted in one country, vest over a multi-year period during which the employee may move between jurisdictions, and are exercised or realised in yet another country. Each country where the employee worked during the vesting period may claim a share of the tax on the gain — and the rules for calculating each country's share differ significantly.

For HNW professionals receiving significant equity compensation — perhaps options or RSUs worth hundreds of thousands or millions of pounds across a vesting schedule — the international tax treatment can be the largest single financial planning variable in their move abroad. Getting it wrong can result in double taxation or missed planning opportunities.

This guide explains the core principles of international equity compensation taxation, the UK rules for inbound and outbound employees, and practical planning strategies. Always seek specialist advice — rules change and your position depends on individual facts.

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Types of Equity Compensation

Share Options

A share option grants the holder the right to purchase shares at a fixed price (the "exercise price" or "strike price") at a future date (or during a defined window). The value of the option is the difference between the market price at exercise and the exercise price ("the spread").

Approved schemes (UK): Enterprise Management Incentives (EMI), Company Share Option Plans (CSOP), and Save As You Earn (SAYE) schemes have specific UK tax advantages.

Unapproved options: options not under an approved scheme — common in multinational groups — are taxed as employment income at exercise.

Restricted Stock Units (RSUs)

An RSU is a conditional entitlement to receive shares at a future date (vesting date), subject to satisfying performance or service conditions. There is no exercise price — the employee receives shares (or cash equivalent) at the market price on vesting. RSUs are particularly common in US multinational groups.

Performance Share Plans (PSPs)

Similar to RSUs but with performance conditions (e.g., relative total shareholder return, earnings per share growth) that determine how many shares vest.

Phantom Shares / Share Appreciation Rights (SARs)

Cash-settled equivalents that do not involve actual share ownership but provide a cash payment equivalent to the gain on a notional share holding.

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The Vesting/Exercise Period Problem

The fundamental tax issue for mobile employees is the vesting period: the period between grant and vesting (for RSUs/PSPs) or between grant and exercise (for options). During this period, the employee may work in multiple countries. Each country may claim taxing rights over the portion of the gain attributable to the time spent working there.

The OECD Approach

The OECD's guidance on Article 15 (employment income) of the Model Tax Convention provides a framework. For equity compensation:

• The total spread/gain is apportioned over the vesting/service period.
• Each country where the employee worked during the vesting period claims the portion corresponding to the days worked there.
• This is the "time apportionment" approach.

Example

An employee receives RSUs worth GBP 500,000 (at vesting) over a 3-year vesting period. She worked in the UK for 1 year, in Singapore for 1 year, and in Germany for 1 year. Applying time apportionment:

• UK: 1/3 × GBP 500,000 = GBP 166,667 — subject to UK income tax.
• Singapore: 1/3 × GBP 500,000 = GBP 166,667 — subject to Singapore income tax (Singapore has no capital gains tax; employment income is taxable at progressive rates).
• Germany: 1/3 × GBP 500,000 = GBP 166,667 — subject to German income tax.

In practice, the calculation is more nuanced (working days vs. calendar days, performance periods, different vesting tranches) but the principle is straightforward.

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UK Tax Treatment — Inbound Employees

Employment-Related Securities (ERS)

The UK taxes most equity compensation as employment income under the Employment-Related Securities (ERS) legislation (ITEPA 2003, Part 7). For unapproved options and RSUs:

• Grant: generally no UK tax at grant (unless the options have a market value at grant).
• Vesting/Exercise ("the chargeable event"): income tax (and NIC) on the spread at vesting/exercise.
• Disposal: capital gains tax on any gain between the vesting value and the disposal proceeds.

For UK tax residents with options or RSUs that vested partly while non-UK resident, the UK taxes only the portion apportioned to UK working days. This requires careful calculation and record-keeping.

The PAYE Obligation

Employers are required to operate PAYE on equity income at the point of vesting/exercise. For internationally mobile employees, employers must track and calculate the UK-apportioned element. Employees who receive equity from a foreign employer (not operating UK PAYE) may need to self-assess the UK tax due.

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UK Tax Treatment — Outbound Employees

Leaving the UK with Outstanding Options/RSUs

If a UK-resident employee moves abroad with unvested options or RSUs:

• The gain accruing during the UK working period is taxable in the UK at the eventual chargeable event.
• The gain accruing in the new country of residence is taxable there (subject to that country's rules).
• Good record-keeping from the date of departure is essential.

Double Tax Treaty Relief

Double tax treaties between the UK and the host country should provide relief from double taxation. The standard approach is for the host country to tax the full amount and the UK to give credit for host-country tax against UK tax on the UK-apportioned element. However, treaty provisions on equity compensation vary — some older treaties pre-date the OECD guidance and may not clearly address vesting period apportionment.

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Social Security (NIC and Equivalents)

In addition to income tax, equity compensation typically triggers employer and employee National Insurance Contributions (NICs) in the UK, and social security equivalents in other jurisdictions.

For internationally mobile employees, the question of which country's social security applies is determined by:

• Whether the employee is covered by a bilateral social security agreement (the UK has agreements with many countries).
• Whether EU social security coordination rules apply (the UK-EU trade deal retained some social security coordination for certain purposes post-Brexit).
• The employee's employment contract structure (employed by one entity vs. multiple).

Social security on equity compensation is often an afterthought — but for large RSU vesting events, NIC/social security can be a very significant additional cost (15% employer NIC on the vesting gain, the rate applying from 6 April 2025, for example, for UK-based employees).

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US Equity Compensation — Section 83(b) Elections

For employees receiving restricted stock (not RSUs) from US-incorporated employers, the Section 83(b) election allows the employee to be taxed on the fair market value of the stock at grant (rather than at vesting). If the stock increases significantly in value during the vesting period, the 83(b) election can convert what would otherwise be ordinary income into capital gains.

This election must be made within 30 days of grant and cannot be revoked. It is particularly relevant for US persons or for employees receiving shares in US companies.

UK residents receiving restricted stock in US companies need specialist advice on how the UK and US rules interact.

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Practical Planning Considerations

1. Before Moving Abroad

• Accelerate vesting where possible: consider whether options or restricted shares can be exercised or vested before leaving the UK, crystallising the gain at UK tax rates and clearing the cross-border complication.
• Maintain records: document the number of shares/options outstanding, their grant date, exercise price, and the number of days worked in each country throughout the vesting period.
• Review employment contracts: ensure that equity plan rules permit participation by non-residents and that tax withholding arrangements are clear.

2. After Arriving Abroad

• Notify the plan administrator: many equity plans require participants to notify the company if they change tax residence.
• Track working days: maintain a contemporaneous log of days worked in each country for apportionment purposes.
• Plan exercise timing: the tax rate on exercise depends on your circumstances at the time of exercise. Timing a large option exercise in a year of low other income, or in a low-tax residence jurisdiction, can significantly reduce the overall tax cost.
• Consider tax-efficient exercise strategies: cashless exercise vs. holding the shares; same-day sale vs. post-exercise holding period.

3. Approved UK Schemes

For employees who are UK-based at grant, approved schemes (EMI, CSOP) offer specific UK tax advantages:

• EMI: qualifying options can be exercised without income tax (only CGT applies at disposal, with business asset disposal relief potentially reducing the rate to 18% — the BADR rate for 2026/27, up from 10% to 14% in 2025/26 and to 18% from 6 April 2026 — subject to the £1 million lifetime limit).
• CSOP: up to GBP 60,000 of options (as of 2026) can be granted without income tax on exercise.

Employees who become non-UK resident after grant may lose access to some of these benefits — specific advice is needed.

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How Global Investments Can Help

Global Investments advises internationally mobile professionals and executives on the financial planning implications of equity compensation across jurisdictions. Whether you are preparing to move abroad with outstanding options or RSUs, navigating a large vesting event while living outside the UK, or planning the timing of equity exercises, our advisers can help you understand the tax position and identify planning opportunities.

We work alongside specialist employment tax advisers and international tax counsel to ensure that equity compensation is handled correctly in all relevant jurisdictions.

Contact Global Investments for a confidential discussion about your equity compensation. Seek regulated tax and financial advice specific to your individual circumstances. Rules change; this guide reflects the position as of June 2026.