ESOP Tax in Singapore: The 75% Exemption Most Guides Still Cite Expired in 2024

Stock option and share award gains in Singapore are taxed as employment income when they're exercised or vest, not when they're granted — and since January 1, 2024, there's no startup-specific break softening that bill. The Equity Remuneration Incentive Scheme (ERIS), which used to exempt up to 75% of a qualifying start-up employee's option gains, stopped applying to any gains realized on or after that date, regardless of grant date. Issue options to a Singapore employee today and the gain is taxed in full — and for non-citizen employees, a separate rule called deemed exercise can trigger that tax before they've sold a single share.

Search "ESOP Singapore startup" and a surprising number of results, including pages from equity management vendors who should know better, still describe ERIS's 75% exemption as something usable today. It closed. Here's what actually governs a Singapore ESOP now, and the parts that catch founders and foreign employees off guard.

ERIS is dead, and a lot of the search results don't say so

ERIS let fast-growing, loss-making companies compensate employees with equity instead of cash without handing them a full tax bill on exercise. It had three tracks, scaled to company size — start-up (75% exemption), SME (50%), and all-corporations (25%) — each with its own grant-date window and cumulative exemption cap. The start-up track, the most generous, applied only to options or shares granted between February 16, 2008 and February 15, 2013, within the company's first three years of incorporation.

Those grant-date windows are the giveaway that this scheme isn't something a startup founding today can use. The more decisive fact is IRAS's own cutoff: the exemption doesn't apply to any ESOP or ESOW gains derived on or after January 1, 2024 — so even an employee granted options inside a qualifying window years ago gets no exemption on a gain realized this year or later. If a vendor guide or old blog post still tells you to structure around ERIS's 75% break, that content predates the cutoff.

How the gain is actually taxed now

With ERIS gone, the mechanics are simpler but less forgiving:

• Stock options (ESOP): taxed on exercise. The gain is the shares' open market value on the exercise date minus the exercise price paid — added to ordinary income, no separate lower rate.
• Share awards (ESOW): taxed when received or vested, not at grant. Gain is open market value at that point minus whatever the employee paid.
• Sale-restricted shares: tax is deferred until the resale restriction lifts, using market value at that later date.
• Phantom or cash-settled plans: taxed as ordinary income in the year the payment is actually made, the same as a cash bonus.

Singapore's resident tax table runs progressively from 0% on the first S$20,000 of chargeable income up to 24% on anything above S$1,000,000 — a rate that moved from 22% to 24% starting Year of Assessment 2024, the same year ERIS stopped applying. A meaningful option gain in a single year can push a startup employee near the top of that table on the gain alone.

The deemed exercise rule: the real trap for foreign employees

The part of Singapore's ESOP tax regime that catches people by surprise isn't the ordinary exercise-based timing — it's what happens when a non-citizen employee stops working in Singapore.

For an employee who isn't a Singapore citizen, IRAS applies a deemed exercise rule at the point of tax clearance: any unexercised stock options and unvested share awards are treated as if they'd been exercised roughly one month before the employee's last day of Singapore employment, whether that's a resignation, a termination, or simply being posted to another country. The deemed gain is calculated the normal way — open market value at that deemed date minus whatever the employee paid — and it becomes taxable immediately, as part of the final tax clearance process, via Form IR21.

The problem is obvious to anyone who's actually held private-company options: there's no market to sell into. A departing employee can owe real tax on paper gains from shares they cannot liquidate, sometimes well before a secondary sale, acquisition, or IPO lets them realize any cash. IRAS allows reassessment within four years of the relevant Year of Assessment if the real gain turns out lower than what was deemed — a refund mechanism, not a deferral, so the cash still has to be found up front. Employers can instead apply to IRAS for a "tracking option," deferring tax to the actual exercise or vesting point rather than the deemed date, but that requires prior approval and isn't automatic. We go deeper on deemed-exercise and similar jurisdiction-specific triggers in our piece on stock options for international employees.

No capital gains tax — but don't let that oversell it

Singapore doesn't impose a general capital gains tax, so once the exercise or vesting gain is taxed as employment income, further appreciation in the shares isn't taxed again on a later sale — a real advantage over markets that tax both the compensation event and the eventual exit. But the initial gain, the full spread between grant-era value and exercise or vesting value, is taxed in full as ordinary income with no startup exemption left to soften it. "No capital gains tax" describes what happens after that bill, not instead of it.

A 2025 Budget change that matters for holdco structures

Announced in the 2025 Budget and effective from Year of Assessment 2026, companies can now claim a tax deduction for payments made to a holding company or special purpose vehicle when that entity issues new shares to the operating company's employees under an equity plan. The deduction is capped at the lowest of: the amount the operating company actually pays, and the fair market value (or net asset value) of the shares at grant, less anything the employee contributes.

This matters because a Singapore holding company sitting above operating subsidiaries elsewhere in the region is a common structure, not an edge case — startups incorporated across Southeast Asia route equity grants through a Singapore Pte Ltd parent precisely because Singapore company law has cleaner statutory mechanics for shares and convertibles than some neighboring jurisdictions. We cover that holdco pattern in our breakdown of cap table software for Southeast Asian startups. Before YA2026, the operating company's own deduction position on these cross-entity grants was murkier; this change gives it a defined floor.

The 50-shareholder cap almost never actually bites

Founders sometimes hesitate to issue real shares (as opposed to options) because a private company limited by shares is capped at 50 members under Section 18 of the Companies Act 1967. That cap is close to irrelevant for ESOP purposes: employees and former employees holding shares under an equity scheme are excluded from the count entirely. A startup can grant actual shares to a wide slice of its workforce without tripping the cap or being forced into a public-company structure. Separately, the Securities and Futures Act exempts employee option and share-award grants from the prospectus requirements that would otherwise apply to a share offering.

Where this lands on the cap table

Put together, a Singapore startup's equity register has to track more than "options granted, vested, exercised." It needs each grant's instrument type (option, award, restricted share, phantom unit), since each is taxed on a different event; each non-citizen employee's Singapore employment end date, since that triggers deemed exercise; whether a legacy grant still falls inside the pre-2024 ERIS cutoff; and, for holdco structures, which entity actually issued the shares a deduction is calculated against. None of this is exotic — it's what any startup counsel or finance lead already tracks by hand, usually split across a spreadsheet, a lawyer's memo, and whatever the payroll provider surfaces at tax-clearance time for departing foreign hires.

Where Govy fits — and where it honestly doesn't yet

Govy's cap table tracks multiple instrument types — stock options, RSUs, SARs, phantom shares — against configurable vesting, with each grant recorded as its own event on an append-only ledger rather than a line that gets silently edited later. That matters for a Singapore company specifically because tax treatment turns on which instrument type a grant is and when its taxable event actually happens, not a single "granted" date.

To be direct about the boundary: Govy's jurisdiction-aware legal template pack currently covers Saudi Arabia, the UAE, US-Delaware, and the UK. It doesn't generate a Singapore ESOP or ESOW plan document, an Appendix 8B filing, or a tax-clearance IR21 form — that paperwork still needs Singapore counsel or a payroll provider. What Govy replaces is the tracking layer underneath: one ledger holding every grant's instrument type, vesting schedule, and holder, instead of a spreadsheet cross-referenced by hand against which employees are non-citizens and which grants sit inside a deemed-exercise window.

See how Govy tracks multi-instrument ESOP and vesting in one place at govy.tech.

FAQ

Is ESOP taxable in Singapore?

Yes. Gains from exercising a stock option are taxed as employment income, calculated as the open market value of the shares at exercise minus the exercise price paid. Share awards (ESOW) are taxed on the same basis when received or vested rather than exercised, and if a plan restricts resale, tax is deferred until that restriction lifts rather than at grant.

Does Singapore still offer a tax exemption for startup stock options?

Not anymore. The Equity Remuneration Incentive Scheme (ERIS) used to exempt up to 75% of a qualifying start-up employee's option gains, but IRAS confirms ERIS exemptions don't apply to any ESOP or ESOW gains derived on or after 1 January 2024, regardless of when the options were granted. Several guides still circulating online describe the 75% exemption as current; it isn't.

What happens to unvested stock options when a foreign employee leaves Singapore?

Singapore's deemed exercise rule treats a non-citizen employee's unexercised options and unvested share awards as exercised roughly one month before their employment in Singapore ends, and taxes the resulting gain at that point during tax clearance — even though private company shares usually can't be sold to cover the bill. The employee can apply for reassessment within four years of the relevant Year of Assessment if the real gain, once realized, turns out lower.

Does Singapore tax capital gains on startup shares?

No. Singapore has no general capital gains tax, so once an employee has paid tax on the exercise or vesting gain, further appreciation on the shares themselves isn't taxed on sale. That's a real advantage over many other markets, but it only applies after the initial gain — which is taxed in full as ordinary income — has already been assessed.

Can a Singapore private company have more than 50 shareholders if it grants shares broadly to employees?

Generally yes. Section 18 of the Companies Act 1967 caps a private company limited by shares at 50 members, but employees and former employees who hold shares under an employee share scheme are excluded from that count. A startup can issue real shares (not just options) to a wide employee base without tripping the cap or needing to convert to a public company.