How Are Taxes Handled After Exercising Stock Options Granted While Working at a Venture Company?

Recently, there has been high interest in the profits from stock option exercises by employees following the initial public offerings (IPOs) of well-known companies. News of employees earning gains worth hundreds of billions of won has attracted significant attention.

Stock options refer to the right granted to employees to purchase company shares at a predetermined price after a certain period. Many promising companies are using the stock option system to recruit talented personnel, and interest in stock options is expected to increase further in the future. According to the corporate evaluation site CEO Score, the amount of stock options granted by listed companies over the past five years has steadily increased from 733.3 billion won in 2017 to nearly 2 trillion won this year.

However, it requires more consideration whether exercising stock options always means a windfall. After exercising stock options, taxes such as capital gains tax, earned income tax, local income tax, and securities transaction tax are imposed. Taxes are levied both at the time of exercise and at the time of stock transfer, so without prior preparation, it is common to be caught off guard by the taxes.

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Lee Yoon-su, CEO of the non-face-to-face unlisted stock reporting service ‘Yangdo Doctor,’ said, “We often receive inquiries due to the taxes incurred when exercising stock options.” He added, “It is important to check the taxes to be paid in advance through consultation with experts.”

Park Byung-an, an accountant at Yangdo Doctor, advised, “Stock options granted by venture companies have three tax benefits: ▲venture company tax exemption special cases, ▲venture company tax special cases, and ▲venture company payment special cases. Considering these can reduce the burden on stock option exercisers, so it is important to check eligibility in advance.”