Certain non-citizen employees who previously worked in Singapore may have an opportunity to apply for a tax refund if the actual gain realised upon the exercise or vesting of shares is less than the gain previously subjected to tax under the Singapore deemed-exercise rule.
Under Singapore tax law, certain non-citizen employees are deemed to derive taxable gain from unexercised stock options and unvested share awards when they cease employment in Singapore.
This “deemed-exercise rule” applies to any unexercised or restricted employee share options (ESOP) or any unvested or restricted shares under an employee share ownership (ESOW) plan granted while the non-citizen employee was working in Singapore.
When the deemed-exercise rule applies, the non-citizen employee is deemed to have derived final gain from ESOP or shares under an ESOW plan. The deemed gains are calculated based on the “open market value” of the shares as at one month prior to the cessation of employment or the date of grant of the ESOP or ESOW (whichever is later), less the price payable (if any) by the employee to acquire the shares.
Given the current global equity markets, the actual gains realised upon exercise of the ESOP and/or vesting of the ESOW shares previously subject to tax under the deemed-exercise rule may be lower than the deemed gains.
If the amount of deemed gain computed and reported on the tax clearance return is greater than the actual gain realised by the individual upon exercise or vesting, then the individual may make an application to request that the Comptroller of Income Tax reassess the tax liability based on the actual gain computed for the assessment year to which the deemed exercise relates. There are steps and requirements that the individual must take to apply for a reassessment of tax liability.
Read an April 2020 report [PDF 283 KB] prepared by the KPMG member firm in Singapore
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