The Puerto Rico Stock Option Plan is a specialized compensation program designed to provide executive officers in Puerto Rican companies with the opportunity to acquire company stock options. This plan offers two types of options: Incentive Stock Options (ISO) and Nonqualified Stock Options (NO). Both options allow executives to purchase company stocks at a predetermined price, but they differ in terms of tax advantages and eligibility requirements. 1. Incentive Stock Options (ISO): SOS are a type of stock option offered exclusively to key employees, particularly executives. These options provide certain tax advantages, as the profit made from exercising the options is taxed at the long-term capital gains rate. To be eligible for SOS, an executive must be an employee of the company issuing the options and hold the options for at least two years from the date of grant and one year from the date of exercise. 2. Nonqualified Stock Options (NO): SOS are stock options that do not qualify for the same tax advantages as SOS. These options are available to executive officers and key employees alike, providing more flexibility in terms of eligibility. When SOS are exercised, the profit is subject to both income tax and employment tax, typically at the ordinary income tax rate. The Puerto Rico Stock Option Plan is designed to incentivize executive officers by granting them the opportunity to participate in the company's success and align their interests with the growth of the organization. It aims to attract and retain top talent by offering an additional form of compensation that can create wealth for executives as the company's stock value increases over time. It is important to consult with legal and financial advisors to comprehend the specific eligibility conditions, terms, and tax implications of the Puerto Rico Stock Option Plan. Companies may vary in the details of their stock option plans to best suit their organizational goals and the needs of their executive officers.