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tax on ESPP stock purchase scheme - dollar conversions

  • 27-08-2020 6:32pm
    Registered Users Posts: 1,209 ✭✭✭

    I've always thought I understood this, but someone asked me about a detail in the scheme my company runs, and now I have some doubts.

    This is the quite common Employee Stock Purchase Scheme, 15% discount off the lower of the start/end price of a share using funds you have paid in over a 6 month period.

    The discount off the fair market values of the shares must be calculated and then tax on that discount paid via an RTSO form within 30 days and declared in a form11 the following year.

    To calculate the discount (liable to full income tax) I have always said, use the euro/dollar exchange rate on the day of the market purchase, and use to calculate what the shares would have cost, and actually cost.

    However, it's now been pointed out to me that the company converts the saved euros into dollars on the 15th day of the month, and then purchases on the last day.

    So the question is being asked, shouldn't we use that exchange rate on the date of the dollar purchase as it better represents the "cost" of the shares. That would be one way to look at it, but that seems to confuse the matter, leading to complications later trying to work out CGT and blending what is perhaps a gain with an income value.

    The alternative view is the exchange rate on the last day is correct for the discount calculation, but there is a potential currency gain/loss to be calculated between the 15th and the last day. I am inclined to this view, as the purchase surely is a triggering event requiring a virtual conversion into euros for tax calculations.