It is common for companies to grant stock options to their key executives as part of their employee compensation plans. These instruments provide the possibility to acquire company shares at a previously determined price.

Stock options are subject to a special tax treatment: no taxation is triggered upon the grant of the option (unlike, for example, a cash bonus) or upon its exercise. Personal income taxes apply only when the underlying shares are sold, based on the capital gain calculated as the difference between the exercise price and the sale price.

Additionally, until 2020, capital gains obtained from the sale of market shares were exempt from taxation. Therefore, when a stock option was related to this type of instrument, personal income taxes applied to the appreciation of the shares between the grant and the exercise. Any increase in value between the exercise and the sale was tax-exempt.

In 2022, through Law No. 21,440, the capital gains exemption applicable to stock market shares was modified and replaced by a sole tax at a rate of 10%. However, the specific rules governing stock options were not expressly amended, which created uncertainty regarding the application of this new tax.

In response, the Chilean Internal Revenue Service (SII, for its initials in Spanish)) issued Ruling No. 1,552, dated May 24th, 2023, clarifying that for stock options over market shares, the 10% sole tax applies to the entire increase in value from the exercise of the option to the disposition of the shares, with no application of personal income taxes.

This criterion is particularly relevant for high-income executives, who are typically subject to marginal Global Complementary Income Tax (IGC, for its initials in Spanish) rates close to 40%. Under this approach, the tax treatment defined by the SII allows the economic benefit associated with stock options to be taxed at a significantly lower rate, provided that the shares qualify as shares with stock market presence and that the requirements set forth in Article 107 of the Income Tax Law (LIR, for its initials in Spanish) are met.