How Do I Grant US Stock Options to My Non-US Employees?

Many startups hire globally long before they build a global legal infrastructure.

You hire an engineer in Paris, a designer in Toronto, or a developer in London, and naturally want to offer equity similar to what your US employees receive. On the surface, the process seems simple. You already have a US stock option plan, so it feels like you should be able to use the same structure for everyone.

That assumption creates problems quickly.

International equity grants involve more than translating documents or changing addresses. The same option structure that works smoothly for US employees can create tax consequences, securities law issues, or unexpected liabilities for employees in other countries.

The challenge is that these issues often stay invisible until exercise events or liquidity events, when they become expensive and difficult to fix.

Why International Equity Grants Work Differently

Granting equity internationally usually requires companies to think through three separate layers:

• US tax rules
• The employee’s local tax rules
• Securities laws in the employee’s jurisdiction

Founders often focus only on the first category because they are familiar with their existing US plan.

The problem is that local rules often matter just as much as the US rules.

Ignoring them can create situations where employees receive equity that is unexpectedly taxed, difficult to exercise, or legally problematic.

ISOs Usually Are Not Available to Non US Employees

One of the first issues involves Incentive Stock Options, commonly called ISOs.

ISOs receive favorable tax treatment in the United States and are often used for domestic employees.

However, ISOs generally are not available to non US employees.

Instead, international employees typically receive Non Qualified Stock Options, commonly called NSOs.

That distinction matters because NSOs are taxed differently.

Unlike ISOs, NSOs generally create ordinary income tax consequences at exercise. Employees may owe taxes immediately, even if they cannot sell shares or access liquidity.

Many founders assume they are giving international employees the same benefits as their US employees. In practice, the tax treatment can vary significantly.

Local Tax Rules Often Create Bigger Problems

The employee’s home country often becomes the most important factor.

When employees exercise stock options, many countries treat the spread as compensation income subject to local taxation.

Countries may also have different rules around:

• Timing of taxation
• Social contributions
• Withholding obligations
• Reporting requirements

This creates situations in which employees owe taxes before receiving any liquidity.

That can be a frustrating outcome for employees who expected equity to function as upside rather than immediate financial exposure.

Local Equity Structures May Work Better

Several countries offer tax-advantaged structures designed specifically for employee equity.

Examples include:

• UK Enterprise Management Incentive plans
• French AGA structures
• Canadian employee equity arrangements

These local programs can sometimes create more favorable outcomes than simply issuing US NSOs.

Many startups automatically use their domestic equity plan because it is operationally easier.

However, a one-size-fits-all approach does not always produce the best result internationally.

Securities Rules Still Matter

Tax issues receive most of the attention, but securities laws create another layer of complexity.

Some jurisdictions require:

• Registration filings
• Disclosure obligations
• Specific exemptions
• Additional employee plan requirements

Countries across Europe, Canada, Australia, and other regions often have local rules governing employee equity grants.

Failing to comply with those requirements can create regulatory issues and potentially affect the validity of the grants themselves.

Common Founder Mistakes

• Assuming US Equity Plans Automatically Work Everywhere: Many companies assume international grants simply require adding a foreign employee to the existing option plan. In reality, tax and securities rules can differ significantly by country. A structure that works in California may create unexpected problems elsewhere.
• Ignoring Local Tax Consequences: Founders often focus entirely on US rules and overlook how the employee’s home country handles option exercises. Employees can end up facing taxes long before they have any path to liquidity. That creates frustration and can reduce the perceived value of the grant.
• Overlooking Local Equity Alternatives: Some countries offer employee equity programs with more favorable tax treatment than standard NSOs. Companies that never evaluate local structures may unintentionally provide a less attractive outcome. Exploring alternatives early can create a better experience for international employees.
• Skipping Securities Law Analysis: International equity grants are not just tax questions. Local securities rules may require filings, exemptions, or disclosures before grants can be issued properly. Ignoring those requirements creates unnecessary compliance risk.

10 Minute Founder Self Check

Before granting equity internationally, ask:

• Have you confirmed whether NSOs are the correct structure?
• Do you understand how the employee’s country taxes stock option exercises?
• Have you reviewed local equity alternatives?
• Have you considered securities requirements in the employee’s jurisdiction?
• Have you evaluated potential double taxation issues?

If several of these questions remain unanswered, the grant structure may need further review before issuing equity.

Why International Equity Needs More Planning

Offering equity globally sounds simple because the goal is straightforward. Founders want employees in different countries to participate in the company’s upside.

The challenge is that international equity is rarely a copy-and-paste process.

The companies that handle this well usually invest time upfront understanding tax treatment, local rules, and employee experience before grants are issued.

Building a Global Team and Trying to Understand Equity Along the Way?

Schedule a free discovery call with our team to learn more about startup growth decisions and fundraising topics that founders encounter while scaling internationally.

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Sources Used

• International Equity Compensation for Startups — Fenwick & West, https://www.fenwick.com
• Global Equity Plan Considerations — Baker McKenzie, https://www.bakermckenzie.com
• UK EMI and French AGA Plan Overviews — HMRC and Direction Generale des Finances Publiques, https://www.gov.uk and https://www.impots.gouv.fr