This kind of option gives the holder a right to payment in cash that equals the market value of the share reduced with the agreed upon price. This kind of incentive program is constructed in a similar way as a stock option program and includes restrictions. A SAR is not transferable and has a value only to the holder.
The difference between stock options and SARs is that you normally receive cash instead of the possibility of buying shares.
The benefit will be taxed as ordinary income and will occur when the option can be exercised at the vesting date and at the date of exercise.
If there is a possibility for you to choose between obtaining a share or payment in cash then the taxation will occur when you actually exercise the option regardless if you chose payment in cash or shares.
If the employer decides whether you shall receive shares or a cash payment when you exercise you SAR, the taxation takes place when the option can be exercised at the vesting date and at the date of exercise.