Long story short, I have a job offer that has bonuses paid part in equity in the company, which is a foreign private unlisted scale-up. I am now trying to figure out what the tax treatment of these grants would be, considering the private status of the company.
My understanding is that equity grants become employment income on the vesting date (vs grant date). So if bonuses for work in '26 are granted in '27, and vest over '28-'29, I would also be considered to have received the income in '28-'29 based on the fair value at that time.
Above seems simple and clear – what is less clear to me is how the company valuation for tax purposes is established when it is pre-IPO? Would it be based e.g. on latest funding round valuation – which can be months/years stale – or something else?
As a follow-up: since the company is private, I likely won’t be able to sell the shares until an IPO or liquidity event. If the company’s valuation or the JPY exchange rate moves unfavorably between vesting and the eventual sale, my understanding is that I end up paying income tax on high paper value in vesting year and then realize massive capital losses when I finally can sell (e.g. company USD valuation tanks 30% and JPY strengthens another 30%). Is this correct? If so, any taxation silver linings to this, or am I at the mercy of the company being accurately valued for taxation in the vesting year? My understanding is that possibly I won't even be able to carry forward the losses since the company is private.
by Dafe8