⚠️  The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️

A more comprehensive set of information for this country and work relationship is available on Easop.

If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡

✅ Yes, you can grant non-qualified stock-options (NSO) to employees in Kenya.

In a nutshell, what does taxation look like?

• At grant 👉No taxation.

• At exercise 👉 At the time of exercise, the spread (i.e. the difference between the FMV of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income.
  
  
• At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

✅ Yes, you can grant non-qualified stock-options (NSO) to EoR employees in Kenya.

In a nutshell, what does taxation look like?

• At grant 👉No taxation.

• At exercise 👉 At the time of exercise, the spread (i.e. the difference between the FMV of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income.
  
  
• At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

✅ Yes, you can grant non-qualified stock-options (NSO) to contractors in Kenya.

Note that granting stock options to contractors could increase the misclassification risk (i.e. the contractor relationship being requalified as an employer-employee relationship, with all tax consequences that can go with it). This will never be the only factor though, what counts primarily for determining the degree of misclassification risk are factors relating to the modalities of the services performed (control over the contractor’s work, exclusivity, term of the services, etc.).

In a nutshell, what does taxation look like?

• At grant 👉No taxation.

• At exercise 👉 At the time of exercise, the spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as “gross income” to be paid as part of the grantee’s installment taxes. The gain will need to be reported as income in the annual tax return.
  
  
• At sale 👉 There’s no taxation at the time of sale of the shares in a foreign company.

Is there a tax-favored scheme and how can I make sure the grantee can benefit from it?

Capital gains on the sale of shares of a foreign company are currently not taxed so stock options are a good way to incentivize your team members.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.