Comparison of equity distribution schemes Germany vs U.K vs U.S.A

	Germany	United Kingdom	United States
Preferred scheme	Virtual Stock option (VSOP)/ Phantom shares	Enterprise Management Incentive (EMI)	Incentive stock option (ISO) and Non-qualified stock option (NSO)
Requirements	No specific requirements for start-up since they are not Government backed scheme, virtual SOPs are just contractual obligation under law of obligations between the start-up and employees and only tend to economically simulate the equity-based programs.	Company requirements: < 250 employees and Gross assets under £30m and the start-up is independent that is not controlled by a corporate/ larger parent. Employee requirements: Employees shall be working at least working >25 hours a week or ¾th of their working time. Maximum value of unexercised option for individual employee is £250K in value of strike price. A limit of £3M worth of strike price value of option can be granted under EMI scheme.	ISO: ISO can be availed by employees belonging to the company or its parent, an individual can avail up to $100k worth of market value exercisable stock options per year. A limit of option exercise time after issuance is 10 years. NSO: Available to anyone outside the company as well (Employees, consultants, advisors, service providers etc.,)
Rights of Shareholders	Virtual Stock option holders don't have the rights to information, monitoring or profit-sharing rights as it is the case for GmbH or UG shareholders. Since the VSOPs are event triggered and governed by contractual law not the company law the employees have transparency on how much they would get in the event start-up exit/ IPO.	Shareholders under EMI scheme cannot challenge the corporate decisions if there is already a major support, but the they have rights to be kept informed about the decisions.	Shareholders under ISO and NSO scheme cannot challenge the corporate decisions if there is already a major support, but the they have rights to be kept informed about the decisions.
Strike price determination	The valuation from last funding round is taken to determine the strike price and to avoid additional taxes. But still no standard framework is available for shares valuation, this can lead to uncertainty.	Valuations can be justified with the tax authorities that are usually below 70 percent than last round of valuations, and for profitable start-ups the valuations can be as low as nominal share values.	Strike price is determined by 409A valuations once every 6 months to provide assurance, and are usually 60 percent below last round valuation. Also, the Varies with respect to closeness to exit
Employee tax timing	Taxable only at the point in time when employees receive the cash benefit (in the event of a start-up exit or an IPO/ICO)	Employees are tax liable when they sell shares from EMI options.	ISO: Taxable at the point of sale. If the preconditions for holding periods are not met then they are taxed differently as explained in the results section. With section 83(i) of the tax code in 2018 allows the employees to exercise and defer their tax payments up to five years, or until shares become tradable. NSO: Taxable at the both exercise and point of sale.
Employee tax rate	As of 2021, The taxation on VSOP on cash payment is taxed as income up to 45% depending upon the tax class, plus social security contributions of almost 20%, if qualified church tax and solidarity surcharge is applicable as well.	As of 2021, any gains in excess of an employee’s annual capital gains allowance of £11.700 are subjected to capital gains tax of 20%. In the case if EMI options are held for >2 years between option grant and sale, an entrepreneurs' relief of 10% reduction is applied	ISO: As of 2021, if ISOs are held for more than 1 year and 2 years after grant will be subjected to long term capital gain tax of 0-20%, based on the employee tax bracket. If the above conditions are not met then its a disqualified disposition and employees can be subject to an upward tax of 37% NSO: At the point of exercise, subjected to income tax 10-39,6% plus social security of 6,2% and Medicare. At the point of sale subjected to short term or long-term capital gains tax depends on how long the options were held.