The problem in Sweden at least is that you need to pay this tax before you can even sell your stocks. So basically you have no money to pay the taxes with.
When I received my stock options for the company I paid no taxes at all. When I exercised them I got a tax hit, but that had to be paid like six months later so there was no issue selling enough stock to pay the tax.
Another funny thing about wealth creation.
Norway and Sweden has more dollar billionaires pr capita than the US [1].
This works if you are in a position to sell the stock to pay the tax. If the company is not publicly traded you need to find a buyer, and because you really need that money before the tax returns you might have to sell at a lower price than the one you were taxed on, if you can find one at all. This makes it harder for startup employees to exercise their stock options before an exit or the company going public, unless they already have cash at hand.
Source: Have exercised stock options in a Norwegian startup. I was lucky enough to have enough cash at hand to pay the tax.
Same as the US. You pay tax on the valuation difference when you exercise. and AFAIK you have to exercise before you sell on any primary or secondary market.
The topic though is not really about billionaires, which generally are the founders of the company. It's about the much larger number of multimillionaires that got their money from stock options on IPOed companies. There are far fewer of those in Europe.
But, to be honest, that's really not that much different than in the US. While you hear a lot about incentive stock options (ISOs) in the US not being taxed until you sell them, in reality most people who exercise ISOs will have to pay alternative minimum tax (AMT, a kind of parallel tax scheme to 'normal' taxes) when they exercise. When I exercised my options I had to pay more in tax than I did for the exercise price of the options themselves.
I'm talking about employee stock options. Google "personaloptioner". When you exercise the options and get stocks you need to pay taxes on the difference between the strike price and the market value, even if you have no possibility to sell the stocks (if the company is private for example).
Isn’t this often true in the US as well? You pay to exercise your stock options, and then pay taxes on them (since they’re income). But if your company is still private, they’re basically illiquid.
