Tax on US based stock options sale?

Question

Hi,

I was working for an US multinational company in India. The company had given me stock options and i sold all the vested options after i left the company 2 months back.

I would like to know will i have to pay any tax on it. If yes, at what rate? Wouldnt it be considered as a long term capital gain. All vested options were over an year old.

It will be great if you can help me understand this.

Thanks in advance!

Answer 1

The tax implications for a foreign investor will depend on whether that person is classified as a resident alien or a non-resident alien. To be considered a non-resident alien, a person must meet several guidelines. First of all, the person cannot have had a green card at any time during the relevant tax reporting period (e.g 2005) and cannot have resided in the U.S. for more than 183 days in the past three years, including the current reporting period. However, non-U.S. citizens who hold green cards and have been in the U.S. for more than 183 days are classified as resident aliens for tax purposes and are subject to different guidelines than non-resident aliens.

If you fall under the non-resident alien category and the only business you have in the U.S. is in investments (stocks, mutual funds, commodities) within a U.S. dollar-denominated brokerage firm or other agent, you are subject to the following tax guidelines. In terms of capital gains, non-resident aliens are subject to no U.S. capital gains tax, and no money will be withheld by the brokerage firm. This does not mean, however, that you can trade tax free - you will likely need to pay capital gains tax in your country of origin. In terms of dividends, non-resident aliens face a dividend tax rate of 30% on dividends paid out by U.S. companies. However, they are excluded from this tax if the dividends are paid by foreign companies or are interest-related dividends or short-term capital gain dividends. This 30% rate can also be lower depending on the treaty between your home country and the U.S., so it is important that you contact your brokerage firm to verify the rate. If you are a resident alien and hold a green card or satisfy the resident rules (183 days), you are subject to the same tax rules as any U.S. citizen.

For more information, see IRS Publication 519: U.S. Tax Guide For Aliens.
http://www.irs.gov/pub/irs-pdf/p519.pdf

Answer 2

confident, If the alternative is exercised in the US. Taxes will matter on your status (residend or non-resident alien) and extra than a number of alternative components. in case you're placed outdoors the US and are not a US citizen, national or resident alien, tax will immediately be withheld by making use of the broking provider.

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