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HMRC internal manual

Double Taxation Relief Manual

Double Taxation Relief Manual: Guidance by country: Japan: Share Options

Share options granted by reason of employment are covered by Article 14 of the Convention (the Article dealing with income from employment). Paragraph 4 of the Protocol to the Convention shows how benefits, income or gains arising from such options are to be dealt with when employees have worked both in the UK and Japan between the grant of such options and their exercise.

Where an employee has worked in both the UK and Japan over the life of the option and is not resident in the UK when the option is exercised, the UK can tax that proportion of the benefits, income or gain which relates to the period between grant and exercise of the option during which the individual has been employed in the UK.

This differs from the normal apportionment, which follows guidance from the OECD, which apportions by reference to the period between grant of the option and its vesting date. The vesting date is the date that the individual is able to exercise the option, whether or not he actually does so.