The actual exercise of stock options results in a benefit-in-kind if shares are transferred free of charge or at a reduced price. The benefit-in-kind is calculated from the difference between the market value of the shares at the time of transfer of the economic ownership and any payment made by the employee (i.e., the acquisition costs).
Once the amount of the benefit-in-kind has been determined, it must be examined whether it should be sourced over the vesting period. In general, the relevant vesting period according to German tax guidance is the period between the grant of the option and the first possible exercise of the option right by the employee (“vesting”). If no direct allocation of domestic and foreign activities is possible, the right of taxation is based on the actual working days in this period irrespective of any change in the employee’s resident status during the vesting period.