Shareworks Global Intelligence Newsletter March 2021

March 1, 2021 Shareworks Marketing

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Shareworks Global Intelligence newsletter provides an overview of recent changes affecting employee share plans globally. 

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Country Updates

Belgium: New Tax on Securities Accounts

Pursuant to a law passed on February 17, 2021, the Belgian government introduced a new annual tax of 0.15% on financial instruments (which can include shares and cash) held in securities accounts owned by Belgian residents and, in certain cases, non-residents, where the average value of the account equals or exceeds EUR 1,000,000 during the relevant reference period. For calendar year 2021, the average value of securities accounts will be calculated from February 26, 2021 through September 30, 2021, whereas future periods will generally run over a 12-month period starting from October 1 and ending on September 30 of each subsequent year.

The 0.15% tax due is limited to 10% of the difference between the taxable base and the EUR 1,000,000 threshold. This cap is assessed per securities account (irrespective whether the account is held in Belgium or abroad) and includes Belgian as well as foreign securities held by Belgian residents. Securities accounts held by non-residents only fall within the scope of the annual tax if they are held in securities accounts with a financial intermediary established or located in Belgium and not otherwise excluded by treaty provisions.

The annual tax on securities accounts is in principle required to be withheld by the Belgian financial intermediary and declared and paid to the tax authorities. In all other cases, the tax generally needs to be declared and paid by the holder of the securities account(s), in which case the deadline for filing the tax return for this tax corresponds with the deadline for filing the individual’s annual tax return for personal income tax purposes electronically.

As a general rule, no annual tax on securities accounts is due where that the average value of the securities account is less than EUR 1,000,000.

The annual tax on securities accounts contains several anti-abuse provisions that intend to remediate tax avoidance (e.g. conversion of qualifying financial instruments to non-qualifying financial instruments such as nominative shares) or splitting an existing securities account into several securities accounts in order to avoid reaching the EUR 1,000,000 threshold.

Note that the rules are complex and contain varied requirements as well as exclusions.

This information has been provided by our collaborating law firm in Belgium, Argo Law (contact: Philippe Rens at philippe.rens@argo-law.be)

 

Brazil: Social Security Thresholds for 2021

Effective from January 1, 2021, employee social security thresholds have been adjusted as detailed below. The applicable rates remain unchanged.

Monthly wage (BRL)

Rate

0 - 1,100

7.5%

1,100.01 - 2,203.48

9%

2,203.49 - 3,305.22

12%

3,305.23 - 6,433.57

14%

6,433.57 and up

0%

This information has been provided by our collaborating law firm in Brazil, Pinheiro Neto - Advogados (contact: Cristiane Matsumoto at cmatsumoto@pn.com.br)

 

China: Shanghai SAFE Abolished Annual Registration Requirement

In January 2021, China State Administration of Foreign Exchange Shanghai Branch (“Shanghai SAFE”) advised that an annual filing for any incentive plans registered with Shanghai SAFE is no longer required as a general matter. 

However, in the event of any material change concerning a SAFE approved plan or the foreign issuer, a further application must be made to SAFE no later than three months following any such material change. For this purpose, a material change includes, but is not limited to the following:

  • one or more new plans are added to the SAFE registration, and/or a currently registered plan is removed from the registration; 
  • significant changes result in the affairs of the foreign (offshore) issuer, such as a merger, restructuring, etc.;
  • change in the offshore trustee;
  • change in the onshore agency; 
  • any significant change to the administration of the plan; and
  • any other significant change, as determined in the discretion of Shanghai SAFE.

Any non-material changes to the SAFE registration (including the regular update of the list of participants) are not required to be reported to SAFE as they happen but can be registered together with the registration of a material change.

In addition, starting in 2022, a company may apply for any necessary outbound remittance foreign exchange quota based on a 3-year estimate, and, where the approved quota is fully used, a further annual filing would be required.

This information has been provided by our collaborating law firm in China, Martin Hu & Partners (MHP) (contact: Kevin Xu at kevin.xu@mhplawyer.com)

 

Honduras: Income and Social Tax Bands Update

Effective from January 1, 2021, income and social tax bands have been updated in Honduras as noted below. The applicable tax rates have not changed. 

Income tax:

Annual income (HNL)

Tax rate

0 - 172,117.89

0%

172,117.90 - 262,449.27

15%

262,449.28 - 610,347.16

20%

610,347.17 and up

25%

Social taxes:

  • Disability, old age and death contribution (2.5% for employees and 3.5% for employers), capped at monthly earnings of HNL 10,282.37;
  • Emergency and maternity contribution (2.5% for employees and 5% for employers), capped at monthly earnings of HNL 9,849.70;
  • Risk insurance contribution (only payable by the employer at 0.2%), capped at monthly earnings of HNL 9,849.70; and
  • Individual pension fund contribution (1.5% for both employers and employees), payable at monthly earnings exceeding HNL 10,282.37.

Employee equity plans offered by foreign issuers are not subject to social taxes in Honduras.

This information has been provided by our collaborating law firm in Honduras , BLP Legal (contact: Adriana Castro at acastro@blplegal.com)

 

Israel: Israel Tax Authority Issued New Green Track Ruling Application Forms

On January 31, 2021, the Israel Tax Authority (ITA) issued two new green track ruling applications forms. Companies wishing to operate tax qualified employee share plans under Section 102 of the Income Tax Ordinance (Section 102) may seek clarity on the tax consequences of certain transactions or features of their plans from the ITA in the form of tax rulings. Green track rulings are standardized applications that are intended to accelerate the process of a tax ruling request by providing specified forms for common questions and issues.

The recently added green track rulings are regarding the following two matters.

M&A Transactions

For employee share plans qualified under Section 102, a two-year holding period must be satisfied before the shares may be sold for the employee to receive the favorable tax treatment under the “capital gains track”. In the context of an M&A transaction, employees may be forced to sell their shares before the expiration of the applicable holding period.

One of the new green track rulings details the application process for companies that want to apply for a special tax ruling to ensure that employee shares would still be eligible for the beneficial tax treatment in such circumstances.

Offering shares through a registered branch

As a general rule, under trustee tracks of Section 102, employee share plans generally have to be offered by an Israeli subsidiary owned directly or indirectly by the issuing company. As a result, when foreign companies want to offer shares in Israel under Section 102, they must register a subsidiary in Israel first. However, the ITA may now be able to approve the offer through an Israeli registered branch under the second new green track form.

This information has been provided by our collaborating law firm in Israel, Yair Benjamini Law Offices (contact: Yair Benjamini at yair@benjamini-law.com)

 

United States of America: SEC Proposes Amendments to Rule 701

Rule 701, adopted pursuant to the U.S. Securities Act of 1933, exempts from registration certain offers and sales by a private company of compensatory equity awards (such as options and RSUs) to employees, contractors and other service providers. The U.S. Securities and Exchange Commission (the SEC) recently proposed several amendments to Rule 701. The table below highlights certain of the proposed amendments.

Rule 701 Requirement

Current Requirement

Proposed Requirement

Cap for Rule 701 Offerings

Amount of securities that may be sold in any 12-month period is greatest of USD 1 million, 15% of total assets of issuer and 15% of outstanding amount of class of securities being offered.

Increase amount of securities that may be sold in any 12-month period to greatest of USD 2 million, 25% of total assets of issuer and 15% of class of securities being offered.

Former Employees

Applies to offers to employees and other eligible service providers who are employed by or otherwise provide services to issuer at time offer is made (while permitting exercise of options or other rights after recipient is no longer employed by or providing services to issuer).

Expand exemption to cover offers of securities to former employees and other service providers so long as offer relates to services provided by employee or other service provider within 12 months prior to their separation from service with issuer. 

Timing of Disclosure

Detailed disclosures must be provided to all persons participating in offering if aggregate sales in any 12-month period exceed USD 10 million (increased in 2018 from USD 5 million). 

Modify disclosure requirement to provide additional disclosure would apply only to sales that occur after USD 10 million limit has been exceeded.

Financial Statements Used in Disclosure

If USD 10 million threshold is exceeded in any 12-month period, issuer must provide participants with two years of consolidated balance sheets, income statements, cash flows and changes in stockholders’ equity, and such financial statements must be of a date that is no more than 180 days before sale.

Require that financial statements be available on at least a semi-annual basis and completed within three months after end of second and fourth quarters. 

Financial Statements Used in Disclosure by Non-U.S. Issuers

Audited financial statements of foreign issuers (who are “foreign private issuers” under U.S. law) required to be provided to employees must be reconciled to U.S. GAAP if not prepared in accordance with IFRS.

Certain foreign publicly traded issuers can provide financial statements prepared in accordance with home country accounting standards without reconciliation to U.S. GAAP if financial statements prepared in accordance with U.S. GAAP or IFRS as issued by the International Accounting Standards Board are not available.

Comments on the SEC’s proposed amendments to Rule 701 were due by February 9, 2021.

This information has been provided by our collaborating law firm in United States of America, Pillsbury Winthrop Shaw Pittman (contact: Jessica Lutrin at jessica.lutrin@pillsburylaw.com)

 

Upcoming Filing and Reporting

Ireland: Equity Reporting

March 31, 2021
Affects: Local Company

Companies are required to report to the Irish Revenue on Form RSS1 (filed electronically) by March 31 any unapproved options and other rights to acquire shares that were granted, assigned, released and/or exercised by employees and/or directors during the preceding year.

Separate reporting requirements apply for approved save-as-you-earn plans, approved profit-sharing plans and employee share ownership trusts. The forms are available for download on the Irish Revenue website.

Failure to comply with these mandatory filing obligations will result in a penalty and, in the case of any approved schemes, may result in the withdrawal of Revenue approval for approved schemes.

This information has been provided by our collaborating law firm in Ireland, McCann FitzGerald, Solicitors (contact: Eleanor Cunningham at eleanor.cunningham@mccannfitzgerald.com)

 

Japan: Equity Reporting

March 31, 2021
Affects: Local Company

The deadline for annual reporting in respect of offshore assets for Japanese employers is approaching. Japanese subsidiaries that are majority owned by non-Japanese companies and Japanese branch offices of non-Japanese companies must file an annual report with the tax authorities, using Form 9(3), if employees have had cash or equity awards that vested or were exercised in the previous tax year.

The due date for filing is March 31 following the end of the tax year. Form 9(3) is available on the website of the Japanese tax authority.

This information has been provided by our collaborating law firm in Japan, Anderson Mori & Tomotsune (contact: Kunihiko Morishita at kunihiko.morishita@amt-law.com)

 

China: SAFE Quarterly Reports

April 3, 2021
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.

This information has been provided by our collaborating law firm in China, Martin Hu & Partners (MHP) (contact: Kevin Xu at kevin.xu@mhplawyer.com)

 

Singapore: Equity Reporting

April 15, 2021
Affects: Local Company

Under the Qualified Employee Equity-Based Remuneration Schemes (QEEBR), qualifying employees may elect to defer payment of the tax due at exercise of stock options and vesting of share awards, including RSUs, for up to 5 years, subject to an interest payment. Under the tax deferral scheme, the applicant must meet certain criteria.

A plan that meets the applicable requirements of the QEEBR legislation is automatically qualified (i.e., no approval is required).

Employees must submit an application form to defer their tax gains to the Inland Revenue Authority of Singapore, and the employer must certify on the application form that the stock plan under which the stock option and/or share award is granted qualifies for the QEEBR Scheme. The form must be submitted to the Singaporean tax authorities by April 15.

This information has been provided by our collaborating law firm in Singapore, Low Yeap Toh & Goon LLP (contact: Low Siew Joon at infolaw@lytag.com.sg)

 

India: Employer Tax Filings

April 15, 2021
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

This information has been provided by our collaborating law firm in India, Little & Co. (contact: Priyanka Pol at priyanka.pol@littlecompany.com)

 

Hong Kong: Equity Reporting

April 30, 2021
Affects: Local Company

Employers must report the number and fair market value of shares granted to their employees during the assessment year. This is done in the Annual Employer´s Return (Form IR56B) and must be filed before 30th April.

This information has been provided by our collaborating law firm in Hong Kong, Vivien Chan & Co (contact: Patty Chan at patty@vcclawservices.com)

 

India: Tax Deducted at Source Certificate and Certificate of Taxable Income

May 31, 2021
Affects: Local Company

Employers in India must issue a Tax Deducted at Source (TDS) certificate on Form 16 to employees by May 31 following the end of the financial year. Form 16 sets out any tax withheld by the employer in the previous year, including withholdings under equity plans.

In addition, Form 12BA (Employer Certificate of Taxable Income) must also be issued to employees by April 30 of the assessment year. 

This information has been provided by our collaborating law firm in India, Little & Co. (contact: Priyanka Pol at priyanka.pol@littlecompany.com)

 

Upcoming Events

17th Annual Certified Equity Professional Institute (CEPI) Symposium

March 23-24, 2021

A 2-day virtual event comprised of sessions on a wide variety of equity compensation-related topics, highlighting industry expert speakers. 

More info: https://www.scu.edu/business/cepi/symposium/

 

Global Equity Organisation (GEO) Australia Virtual 2021

May 25-27, 2021

Australia Virtual — an event dedicated to Australian equity compensation, coming to you virtually 25-27 May 2021.

With sessions specifically designed for the Australian remuneration industry, both for the small and medium-sized company as well as those with larger national and global operations, Australia Virtual 2021 is an opportunity to get all the latest share plan industry information from the convenience of your office or home.

More info: https://www.globalequity.org/geo/AUS2021

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Shareworks Global Intelligence Newsletter April 2021
Shareworks Global Intelligence Newsletter April 2021

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