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Vergide Gündem English Translation Taxation of incomes derived in the stock option plans Due to the rapid circulation of employees in multinational companies, employers have begun to implement various remuneration plans as a form of encouragement in order to enhance employees’ ties with companies and to provide them with extra motivation. One of the main methods used for this purpose is stock option plans. Allowing employees to acquire shares of the company they work for free of charge or at a predetermined price by fulfilling certain conditions determined by the company, stock option plans are comprised of Granting, Vesting and Exercising stages. In the granting stage; the company sets out the conditions that should be fulfilled by the employee to acquire the stock option right, the employee is included in the plan and the share is subscribed. In the vesting stage; the conditions specified in the stock plan are fulfilled by the employee and the stock option right is acquired. In the exercising stage; the employee acquires the shares at a price lower than the market price or free of charge by exercising the vested rights. The lack of specific arrangements regarding stock option plans in our tax legislation despite the more prevalent use of these plans by multinational companies raises hesitations with respect to the stage in which the tax liability will arise and how the liabilities of the company and the personnel will be fulfilled. Under the article 61 of the Income Tax Law, remuneration is described as benefits that are provided in cash and in kind to those working in affiliation with an employer and a certain place of work in return for their services and that can be represented with money. According to this article, share options are also deemed as remuneration. Considering the principle that income must have been derived in order to be taxed, when an employee is entitled to acquire the company’s shares upon fulfillment of the conditions required in the share ownership plan involving the employer, this situation would not be sufficient for the tax to be triggered. It could be said that the tax in the share option is triggered in the stage when the employee disposes of share options physically, economically and legally. In other words, the employee derives income following the stage of gaining the rights of disposing of the shares he acquires or transferring them to third parties, and therefore the said income would be taxed. In this respect, the amount to be considered as remuneration for the employee in case the stock options are acquired would be comprised of the whole amount of the market value of the shares acquired, if the shares are granted free of charge or of the difference between the market value and the price paid to the company, if the shares are granted at a price lower than the market value. Employers must apply withholding tax to the share options deemed as remuneration in accordance with the article 94 of the Income Tax Law, which includes arrangements regarding withholding tax, and include these payments in their withholding tax return. On the other hand, since the payment cannot be associated with the employer in Turkey if the company’s shares are directly granted to the employee by the non-resident company, the amount in question should be declared before the declaration dead line 10 Eylül 2014