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If you are a U.S. citizen or a green card holder, you are taxed on your worldwide income. Regarding taxation
in the U.K., the following applies:
Taxation of Stock Options
The Notes to the Tax Treaty also include guidance on avoiding double taxation
of income earned from the exercise of stock options granted to employees who worked both in the US and the UK. In particular, the Notes state that any benefits, income or gains enjoyed by employees under stock option plans fall within the scope of Article 14, as a form of “other similar remuneration.” This is applicable where an employee:
has been granted a share/stock option in the course of employment in either the US or the UK;
has been employed in both the US and the UK during the period between the grant and exercise of the option;
remains employed by the US or the UK employer at the time the option is exercised; and
under the US and the UK tax laws
, would be taxed by both the US and the UK with respect to such option gain.
The Tax Treaty provides that the home country, i.e., in this case, the country in which the stock options were granted but in which the employee no longer resides, is to tax only the pro-rata portion of the income based upon the period of time from the grant of the stock options to the exercise of such options in which the employee was employed in the home country.
A portion of Article 23 (Elimination Of Double Taxation) reads as follows:
(1) In accordance with the provisions and subject to the limitations of the law
of the United States (as it may be amended from time to time without changing the general principle hereof), the United
States shall allow to a resident or national of the United States as a credit against the United States tax the appropriate amount of tax paid to the United Kingdom;
Link to full tax treaty:
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