FBT ON ESOPs

Indian Subsidiaries of multinational companies like Coca-Cola, Adobe and Dell, which offer their Employees Stock Options (ESOPs) in parent companies abroad, are in for some taxing times. They will have to foot the Fringe Benefit Tax (FBT) bill for the options they give to their Indian employees to acquire stocks in their parent company. These ESOPs are given in the parent company as these MNCs are not listed in India. However, the finance ministry has held that tax liability on these stock options issued by MNCs will have to be borne by the Indian subsidiary. Indian employees get ESOPs in the parent company because of their employment in the Indian subsidiary, and this would make the Indian subsidiary liable to FBT on ESOPs. The Government is expected to clarify on the issue when it brings out guidelines on how the FBT would be levied.