Shareworks Global Intelligence newsletter provides an overview of recent changes affecting employee share plans globally.
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Please find below the Shareworks Global Intelligence overview of certain changes affecting employee share plans globally. This issue also highlights certain upcoming global filing and reporting requirements (for the parent company or local company).
As always, please feel free to contact us if you need further assistance.
Azerbaijan: Mandatory Health Insurance Premiums Postponed until 2021
The completion of the implementation of the mandatory Health Insurance program in the Republic of Azerbaijan have been postponed until January 1, 2021.
It also should be noted that the application of the 50% discount on the amount of premiums to be paid from salaries up to AZN 8,000 in the non-oil/gas sector and the private sector will be extended until January 1, 2022.
China: Employee Share Plans Securities Laws Update
The amended Securities Law of China has clarified that, effective from March 1, 2020, offers of listed shares under an employee share plan will not be deemed to be a public offer under Chinese securities laws regulations, such that a publicly traded foreign parent company offering shares to the employees of its local subsidiary will not trigger any securities laws requirements in China.
Prior to this change, the general practice was for companies to apply for SAFE approval, for foreign exchange compliance purposes, and the securities laws requirements were then deemed to have been satisfied by the SAFE registration. The amended securities law does not apply to foreign private companies, who are currently unable to apply for SAFE approval for their equity programs.
Denmark: New Dividend Withholding Tax Procedure
On May 18, 2020, the Danish Government reached an agreement with the Danish financial sector on a new dividend withholding tax procedure to ensure that the correct amount of tax is levied before Danish companies paying out dividends.
The agreement obliges foreign shareholders of Danish companies to register with the Danish Tax Authority if the foreign shareholder wishes to have the correct withholding tax levied at source or, as an alternative, to seek a refund. Consequently, in case of a tax treaty being applicable in any particular case, the correct withholding tax rate can be applied directly at source. In addition, if it turns out that not enough withholding tax was levied, the tax authorities will be able to collect the underpaid tax from the Danish banks instead of trying to recover the unpaid tax from abroad.
Greece: Amendment for the Taxation of Free-Share Awards
On July 18, 2020, the Greek government tabled a new tax bill to the Greek Parliament. This tax bill is expected pass through Parliament and be ratified into law at the end of July.
Among its other measures, this tax bill provides that the offer of free shares (i.e., restricted shares and restricted share units) by an employer to its employees can benefit from favorable tax treatment. In particular, the offer of free shares by an employer with conditions requiring the fulfilment of certain goals or the realization of certain events, will not be considered as a taxable benefit-in-kind. Instead, when the employee sells such shares, their sale value will only be subject to capital gains tax at a flat 15% rate, and to the special solidarity contribution at progressive rates of up to 10%.
The above-mentioned provisions will be applicable for any income obtained from qualifying awards from January 1, 2020 onwards.
Taiwan: Proposed Taxation of Capital Gains from Unlisted Shares
The Minister of Finance has proposed a bill that seeks to amend the Taiwan Income Tax Act. As per the amendments, capital gains deriving from transfer of unlisted shares would become subject to capital gains tax.
Currently, capital gains derived from transfer of securities are exempt from capital taxation in Taiwan (although they may be subject to the alternative minimum tax), while dividends distributed by companies to shareholders may be subject to income tax. With the proposed amendments, the authorities wish to prevent situations where individual taxpayers could avoid taxation by transferring shares and realizing capital tax-exempt gains instead of receiving income from dividends.
If the bill is passed, the application of capital gains tax on the sale of unlisted shares will come into effect on January 1, 2021.
United States of America: IRS Issues Guidance For Tax Withholding of Stock Awards
The U.S. Internal Revenue Service (IRS) has issued a General Legal Advice Memorandum (GLAM) and an internal procedural update, addressing a number of issues related to the timing and amount of tax withholding of certain stock awards.
Regarding restricted stock units (RSUs) that are settled in shares, the GLAM states that, in applying the next-day deposit rule, income and FICA taxes derived from the RSUs are required to be deposited with the IRS within one business day from the date the employer initiates the payment. As per the GLAM, the payment is considered to be initiated when the employer requests the transfer of the shares to the participant. However, this approach poses challenges for employers, as often the transfer of the shares is not completed by the next business day and consequently, the withholding obligation would arise prior to the employee receiving the shares.
To clarify the issue, in a follow-up to the GLAM, the IRS issued an internal procedural update, pursuant to which the administrative waiver for penalties relating to the timeliness of tax withholding deposits has been expanded to include stock-settled RSUs as well as stock-settled stock appreciation rights (SARs). The same waiver already applies to non-statutory stock options. Under the waiver, IRS examiners may consider the actual settlement date as the liability date when determining whether there has been a late payment under the next-day rule, provided that the taxes are deposited within one business day of the settlement date of the awards and the settlement occurs within two business days of the SAR exercise date/the RSU share payment date.
Upcoming Filing and Reporting
Argentina: Equity Reporting for Argentinian Resident Companies
July 30, 2020
Affects: Parent Company
Argentinian resident companies must report all individuals and legal entities with ownership or voting rights in their capital or equity to the Tax Authority, as the ultimate individual beneficial owner must be disclosed. Companies resident in Argentina are also required to report any changes in top executives and board members within 10 working days of the change.
The reporting must be completed between July 28 – July 30 following the reported year, with the specific date depending on the tax ID of the reporter. For calendar year 2019, the reporting must be done between October 28 – October 30, 2020.
India: Annual Report
September 30, 2020
Affects: Local Company
Indian employers relying on the terms of the General Permission enacted by the Reserve Bank of India (RBI) must file an annual report with the RBI providing details regarding the shares issued to residents of India, the number of employees who received the shares, the amount of funds remitted for the purchase of shares and amounts remitted on account of recharge arrangements, if any, during the previous tax year on a specified form. Companies are advised to file the report by September 30 at the latest.
China: SAFE Quarterly Reports
October 3, 2020
Affects: Local Company
Companies that have obtained SAFE approval for their equity plans in China are required to file quarterly reports with their local SAFE office within three business days following the end of the relevant quarter.
Saudi Arabia: Quarterly Equity Reporting
October 10, 2020
Affects: Parent Company
Companies offering share plans to employees in Saudi Arabia under the revised securities law exemption must notify the Capital Market Authority (“CMA”) within 10 days after the end of the quarter following grant disclosing the total number and value of all offers made to employees during the preceding quarter. This notification can be made by an authorised person or by the company. Plan amendments or changes may also require additional filings with the CMA.
India: Employer Tax Filings
October 15, 2020
Affects: Local Company
Indian employers are required to file Form 24Q with the Indian tax authorities on a quarterly basis. These quarterly returns report information on employment income paid to employees (including from share-settled awards) as well as taxes withheld.
The quarterly returns must be submitted by:
- May 31 for the quarter ending March 31
- July 31 for the quarter ending June 30
- October 31 for the quarter ending September 30
- January 31 for the quarter ending December 31
NASPP Conference & Exhibition 2020
September 1-10, 2020
The annual National Association of Stock Plan Professionals (NASPP) Conference & Exhibition goes virtual.