You can definitely grant non-qualified stock options (NSO) to local residents in Kenya. Contrary to a few African countries, there are no foreign exchange or regulatory obstacles in Kenya for granting stock options, so it’s a good way to incentivize your team members.

NSO

• At the time of exercise, the spread (i.e. the difference between the FMV of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income. The local subsidiary will need to withhold taxes, like it would do with any salary income.
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• There’s no taxation at the time of sale of the shares.

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NSO

You can grant non-qualified stock options (NSOs) to local residents employed via EoR in Kenya.

• At the time of exercise, the spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as part of the grantee’s employment income. The EoR will need to withhold taxes, like it would do with any salary income.
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• There’s no taxation at the time of sale of the shares.

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NSO

You can grant non-qualified stock options (NSOs) to local residents employed as contractors in Kenya.

• The company won’t legally have to do anything vis-à-vis the local authorities as it will be the grantee’s responsibility to report the taxable gains and pay the taxes.
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• At the time of exercise, the spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) will be taxed as “gross income” to be paid as part of the grantee’s instalment taxes.
  The gain will need to be reported as income in the annual tax return.
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• There’s no taxation at the time of sale of the shares.

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