Beginner SAR

What is a SAR?

SAR is an abbreviation for Stock Appreciation Rights. A SAR fits in the catagory of a “bonus” paid out to an employee based on the rise of the value of a share. Via SAR one is not co-owning the company but merely has a right on a potential bonus. The employee participation is connected to the value of the shares of the company in a predetermined period. If the value of the share(s) increases, employees will profit in the form of a bonus either paid out in cash, shares or depository receipts of shares. Some great advantages of the SAR are that in contrary to options an employees does not have to pay to participate, and contrary to true ownership the company nor the employee are paying any taxes at the moment the SAR is set up. All taxes are implied when the bonus is actually paid out (at the end of a term set by the SAR). The disadvantages are that a SAR does not offer true ownership which lowers the engagement effect of participation and the employee is eventually paying significantly more taxes on their profits if all goes well.

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