ESOP — discounted share issuance to employees — is the talent-retention tool of listed companies and startups. But an ESOP is not a simple “share bonus”: it is a securities offering governed simultaneously by securities law, enterprise law and tax law.
1. Legal framework: offering under an employee stock-option programme
The 2019 Securities Law and guiding instruments govern share offerings under employee option programmes: the company needs a plan approved by the General Meeting of Shareholders, issuance rules, eligible persons and conditions, plus reporting and disclosure as required. Listed companies face stricter procedures than unlisted ones — an “underground” issuance (wrong procedure) can draw securities administrative penalties and void the issuance. The common confusion: mixing ESOPs with treasury-share bonuses or stock dividends — three entirely different mechanisms in procedure and tax.
2. Personal income tax on ESOP income: the new framework from 01/7/2026
Law on Personal Income Tax 109/2025/QH15 (effective 01/7/2026) is the new tax framework for individuals — covering securities-transfer income and ESOP benefits. Principle: the gap between market price and the discounted employee price, as well as gains on selling ESOP shares, can trigger tax — timing and computation depend on programme structure. Businesses must design the ESOP with a tax adviser before issuance, because a wrong structure taxes employees more than expected — defeating retention.
3. Designing an ESOP that actually retains: vesting and conditions
On the labour side: ESOP shares typically carry a vesting schedule (ownership accruing with tenure) and performance conditions — employees leaving early may forfeit purchase rights or must resell. These terms must be written into the rules and the employee agreement, consistent with the 2019 Labour Code — unfavourable conditions cannot be imposed unilaterally after promising. Real disputes: key staff quit and claim verbally “promised” ESOP rights with nothing in writing — the lesson is that every ESOP promise goes into writing before announcement.
Conclusion
An ESOP is a three-in-one instrument: securities + labour + tax. Get all three right — the ESOP retains talent; get one wrong — it becomes a source of disputes and penalties.
Frequently Asked Questions
Is an ESOP just a share bonus?
No. An ESOP is a share offering under an employee option programme governed by the 2019 Securities Law (plan, rules, disclosure) — different from treasury-share bonuses or stock dividends.
How is ESOP income taxed from 01/7/2026?
Under Law on Personal Income Tax 109/2025/QH15 (effective 01/7/2026): the market-vs-discount gap and gains on selling ESOP shares can trigger tax, depending on programme structure.
What if an employee leaves before vesting?
Per the rules: purchase rights may be forfeited or shares must be resold. Vesting schedules and conditions must be written into the rules and agreement, consistent with the 2019 Labour Code.
What is the most common ESOP mistake?
Verbal promises to key staff with nothing in writing; procedurally wrong securities issuance; and designing the programme without modelling tax first — leaving employees taxed beyond expectations.
