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For example, if you're based in the US, you can offer ISOs to your domestic employees. However, as you cannot use an EOR to offer ISOs to foreign employees, you would need to offer an alternative, such as NSOs, RSUs, or VSOs.
First things first: You don't have to pay any tax when you're granted those options. If you are given an option agreement that allows you to purchase 1,000 shares of company stock, you have been granted the option to purchase stock. This grant by itself isn't taxable.
Generally, ISO stock is awarded only to top management and highly-valued employees. ISOs also are called statutory or qualified stock options.
In this situation, you exercise your option to purchase the shares but you do not sell the shares. Your compensation element is the difference between the exercise price ($25) and the market price ($45) on the day you exercised the option and purchased the stock, times the number of shares you purchased.
There are two types, each with different taxation: nonqualified stock options (NQSOs) and incentive stock options (ISOs). Since the exercise price is nearly always the company's stock price on the grant date, stock options become valuable only if the stock price rises.
The grant price is the price at which you can purchase shares, and the grant date is the day the stock options are given to you. Vesting is the process of fulfilling the grant (promise). The vesting schedule determines the vesting date - the date when you can begin purchasing stock and using your options.
Non-qualified stock options are issued at a grant price. The grant price is the price at which you can buy the company stock. Your options come with a vesting schedule. During the time between the grant date of your options and the day they vest, you can't exercise your option.
Nonqualified: Employees generally don't owe tax when these options are granted. When exercising, tax is paid on the difference between the exercise price and the stock's market value. They may be transferable. Qualified or Incentive: For employees, these options may qualify for special tax treatment on gains.