A procedural update to the Internal Revenue Manual clarifies instructions relating to the application of late-deposit penalties to tax withholding for NQSOs and extends existing penalty relief to restricted stock units and stock-settled SARs.
IRS GLAM 2020-004 clarifies when income is recognized and the company's tax withholding deposit liability accrues for nonqualified stock option exercises, stock-settled SAR exercises, and payouts of restricted stock units.
Recent legislative updates for Brazil, India, Ireland, Malaysia, United Kingdom and the United States.
An annual return must be submitted in the UK for each open stock plan registration, even if there is no plan activity to report. This year’s returns are due by July 6. New this year, the report includes special instructions for share withholding/net settlement.
The memo by Morrison & Foerster summarizes the new HSR Act filing thresholds for 2020.
On December 20, 2019, the IRS issued proposed regulations under Section 162(m). This article from McGuireWoods summarizes the primary matters addressed under the proposed regs, including a helpful table of key areas.
This article by Morrison & Foerster summarizes the proposed Section 162(m) regs issued by the IRS in December 2019.
This article by PwC summarizes key issues in the IRS's proposed regs under Section 162(m).
This Baker McKenzie alert highlights a Supreme Court case that could impact that social tax treatment of equity awards in Belgium.
Pearl Meyer's summary of the hedging policy disclosure requirements.
This alert by Shearman & Sterling discusses Ninth Circuit's June 2019 decision on stock compensation expenses in cost-sharing agreements.
This PwC alert discusses the most recent decision on cost-sharing arrangements in the Altera case.
This alert from Deloitte Tax discusses a Canadian budget proposal to introduce CA$200,000 annual cap on beneficial treatment of employee stock options for large companies.
PwC's monthly newsletter reporting on developments impacting global stock plans.
The memo by Morrison & Foerster summarizes the new HSR Act filing thresholds for 2019.
This Baker McKenzie alert summarizes new tax withholding requirements in Belgium
This NASPP alert provides a high-level summary of the SEC's hedging policy disclosure rule.
The alert summarizes an IRS Notice of Proposed Rulemaking that will eliminate the requirement to suspend contributions in an ESPP after an employee receives a hardship withdrawal from the company's 401(k) plan.
This client alert by Goodwin summarizes the SEC's hedging policy disclosure rule, which was adopted as required under the Dodd-Frank Act.
This client memo by Sullivan & Cromwell summarizes the SEC's new hedging policy disclosure rule, which was adopted pursuant to the Dodd-Frank Act.
This client alert by Cleary Gottlieb summarizes the SEC's final hedging policy disclosure rule, as required under the Dodd-Frank Act, and discusses how the final rule differs from proposed rule.
This client memo by Davis Polk provides a handy FAQ on the hedging policy disclosure rule adopted by the SEC as required under the Dodd-Frank Act.
This Ropes & Gray alert describes the scope and application of the SEC's final hedging policy disclosure rule and offer some practical guidance for public companies. The rule was adopted in accordance with the Dodd-Frank Act.
This article summarizes Notice 2018-97, which the IRS issued to provide guidance on certain aspects of new code Section 83(i).
Changes to tax withholding rates and compensation thresholds for various tax-related purposes for 2019.
When the Internal Revenue Service (IRS) determines during an examination that a fringe benefit
should have been taxed and the employer accordingly has to pay additional taxes in a later year, how is
the subsequent payment treated for tax purposes? Recent IRS guidance on this issue serves to clarify
when employers will need to “gross up” these payments for the employee.
The comment letter submitted by the NASPP on the SEC's concept release proposing changes to Rule 701 and Form S-8.
This Cooley alert summarizes the SEC's amendment to the Rule 701 disclosure threshold and the SEC's 2018 concept release on Rule 701 and Form S-8.
Korn Ferry’s memo on IRS Notice 2018-68, which provides guidance on Section 162(m) as amended by the Tax Cuts and Jobs Act. The memo reviews the guidance on covered employees, written binding contracts, material modifications, and negative discretion and notes that a legal opinion may be necessary to show that awards with negative discretion constitute a written binding contract.
This client alert by DLA Piper summarizes IRS Notice 2018-68, which provides guidance on Section 162(m) as amended by the Tax Cuts and Jobs Act. The alert focuses on how the use of negative discretion impacts eligibility for grandfather protection, renewed or extended contracts, material modifications, and who is covered employee. The alert also includes a list of action items for employers.
This client alert by Baker McKenzie summarizes IRS Notice 2018-68, which clarifies certain aspects of the expansion of Section 162(m) under the Tax Cuts and Jobs Act. This alert summarizes the IRS’s guidance on who is a covered employee and the types of arrangements that are eligible for the grandfather provision.
This article by McDermott Will & Emery summarizes the guidance provided by the IRS and Treasury in Notice 2018-68, which relates to amendments of Section 162(m) of the Tax Cuts and Jobs Act. Notice 2018-68 provides guidance on who is a covered employee and what types of compensatory arrangements qualify for the grandfather provision. This article focuses primarily on the guidance as to what constitutes a written binding contract for purposes of the grandfather provision.
The IRS and Treasury have issued guidance on who is a covered employee for purposes of Section 162(m) and which forms of compensation are exempt from Section 162(m) pursuant to the grandfather provision included in the Tax Cuts and Jobs Act.
This article by PwC summarizes the guidance is ASU 2018-07, which expands the scope of ASC 718 to include awards issued to nonemployees.
PwC's recent summary of global developments impacting stock plans.
The alert describes the SEC’s recent amendment to increase the disclosure threshold in Rule 701 to $10 million (up from $5 million) and the SEC’s concept release of proposed changes to Rule 701 and Form S-8.
On July 18, 2018, the SEC released an amendment to Rule 701 to increase the threshold at which privately held companies most provide additional disclosures to employees to $10 million worth of stock.
This alert describes the SEC’s amendment to Rule 701 to increase from $5 million to $10 million the annual threshold at which private companies must provide additional disclosure for securities offered and sold pursuant to compensatory arrangements and the SEC’s solicitation of comments on further ways to modernize Rule 701 and Form S-8.
Among the many questions companies face following the changes to section 162(m) is whether to continue seeking periodic shareholder approval for the performance criteria under their incentive plans. Covington & Burling researched what large public companies decided to do this year by reviewing the most recent proxy statements filed by S&P 100 companies.
On July 18, 2018, the SEC amended Rule 701(e), as mandated by the Economic Growth, Regulatory Relief, and Consumer Protection Act. The amendment revises Rule 701(e) to increase to $10 million the aggregate sales price or amount of securities sold during any consecutive 12-month period in excess of which an issuer is required to deliver to employees (and other covered persons) certain disclosures.
On June 20, 2018, the FASB issued ASU 2018-07, which expands the scope of ASC 718 to cover awards issued to nonemployees. This article summarizes the major provisions of the ASU.
The $5 million threshold for additional participant disclosures under Rule 701 will soon be increased from $5 million to $10 million. This is great news for companies which are not reporting issuers in the US.
The Economic Growth, Regulatory Relief and Consumer Protection Act, signed into law in May 2018, directs the SEC to increase the sale threshold triggering enhanced disclosure under Rule 701 from $5 million to $10 million and to index the enhanced disclosure threshold for inflation every 5 years, rounded to the nearest $1 million.
On June 20, 2018, the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.
The standard that governs accounting for nonemployees (ASC 505-50: Equity-Equity Based Payments to Nonemployees) has been absorbed into ASC 718 through the release of ASU 2018-07. Is your Company equipped with the knowledge and processes to update your valuation, accounting, and disclosures?
This Wilson Sonsini alert takes an in-depth look at the deferral opportunity available for qualified equity grants under new code Section 83(i), as created by the Tax Cuts and Jobs Act.
This alert serves as a reminder of the need for yearend reporting to the UK tax authorities (HMRC) with respect to options and other equity incentive awards granted to, and share acquisitions by, UK employees which occurred between April 6, 2017, and April 5, 2018. The requirements are relevant to both UK and US companies.
Businesses and nonprofits operating in Pennsylvania that hire independent contractors or corporate directors who live outside of Pennsylvania, or that pay rent on Pennsylvania property to landlords living outside of Pennsylvania, must carefully consider new Pennsylvania withholding rules that will be enforced beginning on July 1, 2018.
PwC's recent summary of developments impacting stock plans around the world.
Annual share plan returns must be filed with the UK tax authorities (Her Majesty's Revenue & Customs or "HMRC") on or before July 6, 2018 to report information pertaining to employee share awards in the prior UK tax year (April 6, 2017 to April 5, 2018). Companies are encouraged to submit their returns as early as possible.
EU State Aid approval for EMI plans expired on April 6, 2018; all EMI stock option grants (and possibly exercises) from April 6, 2018 through the effective date of new EU State Aid approval will be non-tax advantaged. Until new EU State Aid approval is received, companies with EMI option plans should consider (1) delaying new EMI option grants and (2) notifying affected optionees of the issue.
PwC's recent summary of developments in Belgium, Denmark, and New Zealand.
Tokens have nudged into the mainstream with “initial coin offerings” (ICOs) and the blockbuster rises—and drops—in the prices of cryptocurrencies. An emerging trend sees companies leveraging the value of tokens to compensate founders, directors, employees, consultants and others. Just as with traditional equity-based compensation, token-based compensation has significant legal implications.
Belgian tax authorities have been scrutinizing equity compensation tax withholding and reporting practices of multinational companies (particularly Belgian subsidiaries of US companies).
Several companies with registered equity plans in China received courtesy phone calls from the SAFE office in Beijing reminding them of the timely filing of quarterly reports.
The exclusion from the prospectus requirements for EU/EEA offerings with a value of EUR 5 million during a 12 month period will be decreased to EUR 1 million effective July 21, 2018.
A new tax favorable employee share option incentive scheme was introduced for small-to-medium enterprises in Ireland.
The Singapore Ministry of Manpower has further changed the approval process for payroll deductions by now requiring signed acknowledgement forms and a representative employment agreement.
Her Majesty’s Revenue & Customs released two publications in related to equity awards and in particular, tax-advantaged share schemes.
This article explains how companies can elect to account for compensation that is not deductible under Section 162(m) and covers the processes needed to properly recognize DTAs for nondeductible stock awards.
The U.S. Securities and Exchange Commission brought an action against San Francisco-based Credit Karma on March 12 for issuing employee stock options without a valid registration exemption because the issuer failed to satisfy the requirements of Securities Act Rule 701.
This alert from Morgan Lewis summaries new Section 83(i) of the tax code, which allows private companies to offer employees the opportunity to defer income for stock options and RSUs.
PwC's summary of recent developments in France, India, and Turkey.
This article from PwC provides additional information about tax withholding rates under the Tax Cuts & Jobs Act.
Tax updates for Argentina, Finland, France, Germany, Ireland, Latvia, Netherlands, Philippines, and Romania. Filing updates for Australia, Hong Kong, Ireland, Japan, Luxembourg, Portugal, and the UK.
On January 26, 2018, the FTC announced the adjusted HSR Act notification thresholds for 2018. The new thresholds will become effective on February 28, 2018.
PwC's summary of recent developments in the EU.
Participant statements required under Section 6039 are due by January 31. Here's what you need to know.
This development covers a bill released in late December by the Danish Ministry of Taxation in a public hearing, which is based on negotiations between the two governing political parties, to increase threshold of incentive compensation as percentage of annual salary under certain conditions.
This development summarizes tax withholding changes for 2018.
A summary of ISS's policy updates and clarifications for 2018 that apply to stock compensation plans.
The newly adopted Tax Cuts & Jobs Act has provisions that directly and indirectly affect stock compensation, whether in personal financial planning or in company stock plan administration. This article summarizes the provisions that affect in some way the individual taxation of stock compensation. (The individual tax rates and AMT changes end after 2025, reverting to the current rates unless extended.)
A summary of the provisions of the Tax Cuts & Jobs Act of 2017 that impact stock compensation.
After a flurry of activity in the House and the Senate over the past few weeks, H.R.1, colloquially known as the Tax Cuts and Jobs Act, which represents the first major overhaul of the U.S. tax system in several decades, passed both houses on December 20, 2017. The Act makes certain significant changes in the area of executive compensation, which companies and their advisors should be aware of and evaluate carefully.
PwC's summary of recent developments in Poland, Romania, Russia, and the UK.
This alert summarizes the major sections of the Tax Cuts & Jobs Act that affect stock compensation plans, including changes to Section 162(m) and new Section 83(i).
PwC's summary of recent developments in France, New Zealand, and the Philippines.
PwC's summary of recent developments in the Philippines and the UK.
This article looks at the impact of the new T+2 settlement cycle on the timing of tax withholding and deposit of taxes with the IRS, as well as other related equity award administration, tax withholding, and tax calculation topics, with a particular focus on stock options and restricted stock units.
New requirements from the Shanghai Branch of the PRC State Administration relating to dedicated foreign exchange accounts.
On September 21, 2017, the SEC issued several new pieces of guidance on calculating the CEO pay ratio, including an interpretive release, detailed guidance from the Division of Corporation Finance, and updated CDIs.
A summary of the SEC's newly issued guidance on the CEO pay ratio disclosure, with easy-to-read bulleted lists.
Summary of the SEC's newly issued guidance on the CEO pay ratio, with bulleted lists and table comparing the Staff's hypothetical scenarios.
Chart summarizing the SEC's new guidance on the CEO pay ratio and relating guidance to updated CDIs.
An in-depth look at the SEC's recent guidance on the CEO pay ratio, with additional commentary from Pearl Meyer.
PwC's summary of recent developments in Israel, Poland, and Paraguay.
Withholding tax reform postponed to January 1, 2019; Refund of employer social contribution paid at grant of
qualified awards; Estate & investment income tax reform as from 2018.
This development covers draft legislation that has been released regarding the 2017 budget announcement that non-residents of Australia will be denied access to the main residence exemption for captial gains tax purposes.
PwC's report of new developments in Australia, Canada, France, and the United Kingdom.
This client alert briefly summarizes the key provisions of the SEC's final pay ratio disclosure rule and focuses on the limited exemptions provided for non-US employees. Invoking these exceptions will likely be difficult in practice. Companies should, however, generally be able to take steps to gather the necessary information relating to their non-US employees.
The FASB recently issued ASU 2017-09 to clarify which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The ASU becomes effective for all entities for fiscal years beginning after December 15, 2017.
On May 10, 2017, the FASB issued ASU 2017-09, which clarifies when modification accounting is required under ASC 718.
A recent decision of the French Constitutional Court has held that employer social contribution payments made at grant on certain tax qualified free share awards may be able to be reclaimed if the award fails to vest.
Recent Developments in Chile, Colombia, and the United Kingdom.
The UK has implemented a mandatory gender pay reporting regime, which requires large employers (companies with 250 or more employees who work in or have a sufficiently close connection with the UK) to publish annual reports containing detailed data on their gender pay gap.
In 2016, the FASB issued Accounting Standard Update (‘ASU’) 2016-09, Improvements to Employee
Share-Based Payment Accounting, which makes a number of changes meant to simplify and improve
accounting for share-based payments. One of the most significant changes relates to accounting for tax
deductions associated with stock compensation, and will now result in all tax benefits being reflected in
corporate earnings. This article examines what companies will need to consider in applying these changes.
On March 7, 2017, the FASB issued an exposure draft of a proposed accounting standards update to expand the scope of ASC 718 to cover awards issued to nonemployees.
Recent developments impacting stock compensation in Belgium, Chile, Colombia, Croatia, India, Italy, New Zealand, Sweden, the UAE, and the UK.
This development explores the use of strategic objectives rather than financial metrics in performance awards.
On February 10th, the SEC took action to formally approve of changes proposed by the NASDAQ Stock Market, NYSE MKT LLC, and New York Stock Exchange LLC’s, to shorten the standard settlement cycle for most broker-dealer transaction from three business days (T+3) to two business days (T+2).
In January 2017, the Internal Revenue Service made public its Golden Parachute Payments—Audit Techniques Guide for Large Businesses. The Guide is intended for internal use for IRS agents auditing companies and high net worth individuals. However, in recent years, IRS has shared this and other guides with the public to (i) make known its positions on certain issues, and (ii) help companies avoid the traps that could lead to problems with IRS.
In January 2017, the Internal Revenue Service ("IRS") released an updated Golden Parachute Payments Audit Technique Guide ("ATG") that covers the examination of golden parachutes under Internal Revenue Code ("IRC") Sections 280G and 4999.
This development covers an number of updates that ISS has announced to its proxy voting policy for 2017 that impacted stock compensation.
Recent developments impacting stock compensation plans in Belgium, Chile, Croatia, France, Korea, Romania, and the UK.
Effective September 1, 2013, companies have the ability to offer shares to employees in return for the employee becoming an employee shareholder and surrendering certain employment rights, such as the right not be to unfairly dismissed and the right to redundancy pay.
The Budget has now been delivered and has, broadly, confirmed previous announcements and sought to clarify and update outstanding issues. The headlines may be dominated by the leak of the Budget but there were certainly aspects which will be of interest to employers who operate share schemes and their participating employees.
On January 19, 2017, the FTC announced the adjusted HSR Act notification thresholds for 2018. The new thresholds are effective on February 27, 2017.
To calculate the taxable amount realized from equity awards in Germany, the general rule under administrative guidelines published by the German tax authorities has been to use the fair market value (“FMV”) of the underlying shares on the date that beneficial ownership of the shares is actually transferred to the employee. In practice, for administrative reasons, many multinational companies calc
Recent tax developments in Chile, Colombia, and the Netherlands.
This development covers the FASB's exposure draft of a proposed modification to ASC 718 that is intended to clarify when an amendment to an existing equity plan or award is subject to modification accounting under the standard.
The French Minister of Finance has confirmed the introduction of French withholding tax effective 1/1/2018.
As we reported in our fourth quarter 2015 newsletter, the Australian Tax Office (“ATO”) announced some fundamental changes to the Employee Share Scheme reporting process, including the manner in which the reports can be lodged and the content of the reports.
On June 22, 2016, the IRS proposed new regulations under Section 409A. The proposals are intended to clarify certain aspects of the final regulations under Section 409A and the proposed regulations on inclusion of income for violations of Section 409A.
Although the regulations are not final, they can generally be relied on immediately.
This development is a discussion about some of the most significant clarifications that relate to stock compensation.
This month's issue addresses recent changes in various jurisdictions, including Australia, Denmark, New Zealand, Switzerland and the United Kingdom.
Argentina lifts some exchange control requirements on outward remittance of funds.
On March 30, 2016, the FASB issued Accounting Standards Update 2016-09, which finalizes the FASB's updates to simplify the operation of ASC 718, including changes to the accounting treatment of the tax effects of stock compensation, forfeitures, and share withholding.
This article summarizes how ASU 2016-09 amends ASC 718, including changes to tax accounting procedures, application of estimated forfeiture rates, and the treatment of share withholding.
This article provides a handy table that compares the guidance in ASU 2016-09 to prior US GAAP and includes KPMG's observations on the new guidance.
As part of its effort to reduce the cost and complexity of accounting for share-based payments (stock options, restricted stock, performance shares, etc.), the Financial Accounting Standards Board recently issued Accounting Standards Update (ASU) 2016-09. This article discusses some of the positive and negative outcomes of the new rules.
In March of 2016, ISS issued an update to its FAQs on equity compensation. The updates are summarized in this development.
The recently elected government in Argentina has announced plans to ease restrictions on
foreign exchange rules, reversing the tight controls imposed on residents’ access to the foreign exchange market to purchase foreign currency and remit funds out of Argentina.
On November 30, 2015, the European Commission published a proposal for a new European (“EU”) Prospectus Regulation which is intended to repeal and replace the existing EU Prospectus Directive. Pursuant to this proposal, it is anticipated that issuers not listed or incorporated in the EU will be entitled to rely on the Employee Share Plan Exemption from the EU prospectus filing requirement.
On January 21, 2016, the FTC, the agency charged with administering the Hart-Scott-Rodino Antitrust Improvements Act, announced the adjusted HSR Act notification thresholds for 2016.
Chief Counsel Memorandum 201543003 adds yet another twist to the rules governing who is considered a covered employee for purposes of Section 162(m).
In a Chief Counsel Advice legal memorandum issued on August 24, 2015, the IRS concluded that the compensation paid to the principal financial officer of a “smaller reporting company” can, in certain circumstances, be subject to the deduction limitation of Section 162(m).
The newly elected Liberal government in Canada included in its electoral campaign proposals to reduce tax benefits by limiting the availability of the stock option deduction. It has yet to be seen how this promise will translate into legislative reality, however timely actions may help mitigate any adverse consequences.
For more details, download the full document.
As we reported in our July 2, 2015 client alert, the new Australian share plan legislation received Royal Assent on June 30, 2015 and applies to all equity awards granted on or after July 1, 2015. Under the new tax regime, stock options are generally taxed at exercise only (not at vesting).
As previously discussed in our April 2015 Clients & Friends Newsletter,
on March 31, 2015 the General Secretariat of Public Revenues (“GSPR”) published an administrative circular (Circular No. 1072/31.03.2015) which provides that equity awards are deemed “benefits-in-kind” and not subject to income tax withholding.
The new law (Loi Macron), which introduces changes to the requirements and tax and social tax treatment of French-qualified restricted stock units (“RSUs”), was finally published in the Official Gazette on August 7, 2015.
Following on from our Global Rewards Update in December 2014, the changes to the qualified free share award regime in France have now been approved by the French Senate and have therefore been adopted into law.
Companies trying to submit their annual share plan returns online to the HMRC since Friday, July 3 rd have not been able to complete the submission process due to technical problems with HMRC's online system.
This memo provides a summary of the SEC's proposed rule to implement the compensation recovery provisions of Section 954 of the Dodd-Frank Act, including the compensation and individuals subject to recover, recovery period, and related disclosures.
This memo use a Q&A approach to explain the SEC's proposed rule to implement the compensation recovery provisions of Section 954 of the Dodd-Frank Act.
This memo takes an in-depth look at mechanices of the SEC's proposed rule to implement the compensation recovery provisions of Section 954 of the Dodd-Frank Act.
On July 1, the SEC proposed rules that, if finalized, would direct the national securities exchanges (e.g., NYSE and NASDAQ) to adopt standards requiring listed companies to develop and implement compensation clawback policies and disclose enforcement of said policies.
The Australian parliament has passed the Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015.
Belgian resident taxpayers have long been required to report foreign income and assets held overseas, including foreign shares acquired under employee share plans, to the Belgian authorities. Until recently, taxpayers were only required to indicate in their annual tax return that they held any type of foreign assets and there was very little scrutiny from the Belgian authorities.
We have been informed by our London office that Her Majesty’s Revenue and Customs (“HMRC”) has sent a letter to several companies operating tax-advantaged share plans outlining concerns that some share plans have been registered incorrectly.
New forms have become available for Belgian employees to report offshore bank or brokerage accounts, including accounts related to equity incentive plans, to the National Bank of Belgium (“CP”).
For more details, download the full document.
This UK tax special report discusses registering, self-certifying and filing annual returns for any share plans operating in the UK, expected changes to UK tax, and significant changes to the taxation of internationally mobile employees.
Special Commission Created to Investigate Foreign Bank Accounts Used to Evade Taxation.
The deadline of 6 July 2015 to register share plans UK is fast approaching and you need to ensure that you have registered in advance to be able to make the filing.
In a previous newsletter we informed you of potential Australian tax changes that may result in favourable outcomes for both employers and employees, this can be found here. The changes have now been proposed in the Tax and Superannuation Laws Amendment (Employee Share Schemes) Bill 2015 which was introduced to the Australian Parliament on 25 March 2015.
On 3 March 2015, HM Revenue and Customs (HMRC) released updated templates for annual employee share plan returns.
On February 18 2015, the EU’s Commission published a consultation paper considering potential changes to the Prospectus Directive with the consultation process closing on May 13 2015.
In February 2015, the SEC proposed rules to implement the requirement under the Dodd-Frank Act that companies disclose their policies with respect to hedging by employees and directors.
Companies which operate tax-advantaged plans in the UK will need to certify that their plans/schedules comply with the relevant UK tax legislation.
On July 31, 2014, the European Union (the “EU”) adopted sanctions against Russia through Council Regulation 833/2014, as amended by Council Regulation 960/2014 (the “Regulation”), in response to Russia’s actions in the Ukraine.
A new law (Loi Macron) has been introduced that would result in significant (and mostly positive) changes to the requirements and tax treatment of French-qualified RSUs.
The Federal Tax Court (BFH) recently considered whether the acquisition of shares at a reduced price represents employment income. Although certain elements of the Court’s decision were consistent with prior case law, the BFH seems to have departed from its previous position on the timing of the valuation of the benefit.
Further to our Global Rewards Update of October 2014, the Australian government has released
drafts of the amendments to the employee share scheme (ESS) tax rules. The changes are proposed
to take effect for ESS interests, such as shares (i.e. restricted shares) and rights to shares (i.e. share
options), acquired (i.e. granted) on or after 1 July 2015.
Changes to the UK tax legislation require the annual filings for your share plans to be made online.
Although the individual tax and social security treatment of share options is explicitly provided for in Belgian legislation, this is not the case for the corporate tax treatment of share option plan expenses recharged by a foreign parent entity to their Belgian subsidiaries.
Recent developments impacting stock compensation in Belgium, China, New Zealand, Saudi Arabia, United Kingdom and Venezuela.
On March 13, 2014, in response to a persistent issue regarding the recognition of expense for performance awards, the Financial Accounting Standard Board's ("FASB") Emerging Issues Task Force ("EITF") determined that a performance target which can be achieved after an employee provides the requisite service, is a performance condition that affects the vesting of the awards (not a condition that can affect the grant date fair value of the awards). Therefore, compensation cost should be recognized if it is probable that the performance condition will be achieved. This EITF ruling narrows the scope of acceptable accounting practices, only allowing the use of the performance condition approach.
Following the announcement in December 2013 of proposals to change the taxation and reporting of employee share plans in the UK, Finance Bill 2014 was released on 27 March 2014.
Shanghai SAFE now requires that companies with SAFE approval from Shanghai SAFE report all quarterly plan activity for all plans registered with Shanghai SAFE on a single quarterly report form. Previously, Shanghai SAFE required that different plans be reported on separate reports.
Until recently, the allocation of qualified free shares was not subject to any legal constraints in France, unless shareholders decided otherwise.
Deloitte previously issued Global Rewards Updates relating to Australian employee share scheme (ESS) reporting in June 2010 and June 2012. This update is intended to provide further clarification surrounding the Australian Taxation Office’s (ATO) increased focus in this area.
"In December 2013, Nasdaq amended its rules related to compensation committee composition to bring them in sync with
those applicable to NYSE companies."
Following the Constitutional Court decision, the French government has now adopted into law a package of tax measures. This Global Rewards Update (GRU) is a follow up from our November 2013 GRU. It provides an overview of the key measures relating to equity plans.
Companies with approval from Shanghai SAFE are required to annually re-register
their equity plans with Shanghai SAFE.
Switzerland Finalizes Tax Circular 37
A Regional Court of Appeals in Sao Paolo has concluded that social security taxes were not due on income realized from stock options granted by a Swedish parent company to employees of its Brazilian entity.
For more details, download the full document.
The 2014 French Social Security Financial and Income Tax Bills being discussed before the French Parliament will introduce some chanqes to the income tax and social security rates and bands. The Bills are expected to pass into law shortly and the changes will take effect from 1 January 2014.
New Instructions on Social Security Sourcing of Equity Income in Cross-Border Cases
In a rare piece of good news relating to Section 409A of the Internal Revenue
Code, on October 4, 2013, California reduced its additional state tax on income
failing to comply with Section 409A from 20 percent to 5 percent. This reduction is
effective for taxable years beginning January 1, 2013 and later.
HMRC over recent months have published a number of bulletins providing information and updates in respect of share plans in the UK, including approved plans.
In June 2013, the U.S. Supreme Court struck down Section 3 of the federal Defense of Marriage Act and thus required federal recognition of same-sex marriage recognized under state law. This article considers the impact of this decision on SEC regulations affecting public companies and other fundamental SEC rules that will be affected by the immediate change. The article also examines the impact to definitions and concepts important in the administration of most stock incentives, human resources and employee benefits.
In January 2013, the Office of Tax Simplification (“OTS”) published a report containing recommendations on how the UK taxation of unapproved employee share plans could be simplified.
A case went before the Delhi Tribunal regarding the tax treatment of the gain made on the exercise of stock options by an Indian Resident (but not Ordinarily Resident) individual.
Improvements to the tax treatment of Enterprise Management Incentive (“EMI”) options and the new concept of “employee shareholder agreement,” whereby an employee accepts fewer UK statutory employment rights in exchange for shares with tax advantages, will both take effect in 2013.
HM Revenue and Customs (HMRC) require companies to report any employee-related stock or stock option transactions that have taken place during the UK tax year (April 6–April 5) and may fall into the UK income tax net. The relevant information must be reported on a “Form 42,” which must be submitted by July 6 following the end of the UK tax year. Penalties can arise if companies fail to meet this obligation. A wide range of employee related stock transactions should be included on the form.
The article by Computershare discusses the final cost-basis regulations issued in 2013 and explains how they apply to stock compensation.
The government of the United Kingdom (UK) has published their response to the UK Office of Tax Simplification’s (“OTS”) recommendations in respect to the simplification of unapproved share plans, published earlier this year (summarized in our February 2013 update).
When the High Council of Finance’s (HCF) Taxation and Para-taxation Division was established, the former Minister of Finance presented a list of propositions to simplify the tax legislation established by the tax administration. The current Minister of Finance is continuing this administrative simplification project.
The President of France announced two tax propositions in a televised interview last week that are of particular interest to multinational companies with employees in France. Most notably, he reintroduced the 75% tax rate
for highly compensated individuals.
Many multinational companies have implemented equity plans in People’s Republic of China (“China” or PRC) and learned that it is not always a straightforward task. In addition to designing a suitable equity plan to support human resources and business strategies in China, companies should also consider various registration requirements from local compliance and planning perspectives.
For more details, download the full document.
This memo summarizes the NYSE's new listing standards for compensation committee composition and independence. The SEC was required to direct the exchanges to adopt rules in this area under the Dodd-Frank Act. The rules enhance the requirements to establish the independence of compensation committee members and their advisors.
This memo summarizes NASDAQ's new listing standards for compensation committee composition and independence. The SEC was required to direct the exchanges to adopt rules in this area under the Dodd-Frank Act. The rules enhance the requirements to establish the independence of compensation committee members and their advisors.
On 16 January 2013, the UK Office of Tax Simplification (OTS) published their recommendations in respect of the simplification of unapproved share plans. These recommendations followed the interim report, which invited stakeholders to identify areas of complexity in the tax treatment of share awards and options. This Global Reward Update summarizes the OTS’s recommendations.
On January 16, 2013, the SEC finalized the NYSE and Nasdaq listing standards related to compensation committees and their advisors. Prior to the SEC's approval, both the NYSE and NASDAQ amended their listing standards one last time. The amended, and now final, rules make only a few minor clarifications to the original proposals and include no major changes.
On 29 December 2012, France’s Constitutional Court issued its decision on measures in the 2013 Finance Law, concluding that all the measures affecting companies were valid, but striking down some controversial provisions relating to individuals. The decision cleared the way for the relevant finance laws to come into effect on 30 December 2012.
The French government announced on September 28, 2012, a series of measures that would significantly increase the taxes borne by wealthy individuals, with some of the proposed increases to apply to income earned as of January 1, 2012. The measures, which also include important changes affecting companies, are part of the draft finance bill for 2013.
The UK Chancellor recently announced plans for a new tax break for “owner-employees” of
In recent months, a series of exchange control regulations have been implemented in Argentina. The Argentine government has tightened the Central Bank of Argentina’s control over residents’ access to the foreign exchange market to purchase foreign currency and remit funds out of Argentina in certain circumstances.
New Argentine Exchange Control Rules May Restrict Purchase of Shares under Equity Plans. Plus, Israeli Tax Authority Issues New Delivery & Deposit Rules for Trustee Plan Awards.
The supplementary budget act submitted on Tuesday July 3, 2012, to the Council of Ministers provides for a higher taxation of stock-based compensation and for a sharp rise in the “forfait social” on employee profit sharing schemes.
Unless an exemption applies, the European Union Prospectus Directive (EUPD) requires companies who offer securities in the European Union (EU) to publish a prospectus. There are several exemptions which can apply to employee share plan offers and in November 2010 the EUPD was amended to extend the scope of the exemptions.
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The Brazilian Tax Authorities have reviewed individual 2011 income tax returns and have discovered issues in relation to stock-based compensation benefits.
For more details, download the full document.
HM Revenue and Customs (“HMRC”) require companies to report any employee related stock or stock option transactions that have taken place during the UK tax year (April 6–April 5) and may fall into the UK income tax net. The relevant information must be reported on a “Form 42”, which must be submitted by July 6 following the end of the UK tax year. Penalties can arise if companies fail to meet this obligation. A wide range of employee related stock transactions should be included on the form.
In France, a specific tax regime is available for the grant of stock options, free shares, and Bons de Souscription de Parts de Créateurs d’Entreprise (BSPCE) when certain reporting requirements are met by the company and the beneficiaries.
New Draft Ordinance on Employer Tax Reporting Obligations
After a prolonged and challenging budgetary negotiation process, a federal budget plan for 2012 has been agreed to. The changes under the Belgian Budget 2012 will have an impact on equity-based compensation, in particular, on stock options and dividends.
Where UK employees receive share-based payments after employment has ended and the payment was not taxed and reported on form P45 when the employee left, withholding must currently be operated at the basic rate of tax (20%). Her Majesty’s Revenue and Customs (HMRC) have recently confirmed their intention to amend the legislation so that, with effect from April 6, 2012, the 0T code should be applied to such post termination share gains.
A public company CEO recently consented to a federal district court
order requiring him to pay a $500,000 civil penalty for violating the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act). The Antitrust Division of the Department of Justice (DOJ) charged the executive for failing to satisfy the notification and waiting period requirements of the HSR Act before acquiring common stock under his company's stock-based compensation programs.
On December 12, 2011 the Securities and Exchange Commission charged Stiefel Laboratories Inc. (“Stiefel Labs” or the “Company”)
and Stiefel Labs’ former chairman and CEO, with fraud in connection with the Company’s repurchases of its stock from employees and
former employees between 2006 and 2009. The SEC charged that Stiefel Labs repurchased its stock at undervalued prices and failed to disclose material, non-public information that affected the value of its stock and would have impacted its employee-stockholders’ decision to sell shares back to the Company.
On 7 December 2011, the Belgium Prime Minister announced to Parliament the measures to be included in the 2012
According to the Finnish Income Tax Act, benefits from employee stock option plans are taxable as employment income. The concept of an employee stock option is very wide and basically covers all share based arrangements that are received as a result of an employment relationship.
The PRC State Administration of Taxation ("SAT") recently issued a tax circular, Bulletin  No. 27 ("Bulletin 27"), providing further clarification on the Individual Income Tax ("IIT") treatment of equity-based compensation. The Bulletin is effective from May 1, 2011 and substantially expands the beneficiaries of the preferential tax treatment available under Chinese law.
On March 4, 2011 new Spanish Law – Spain’s Sustainable Economy Law 2/2011 (Ley de Economía Sostenible)
(“the Law”) – was introduced. This new law includes an “additional provision” into the Spanish Personal Income
Tax Act, whereby the exercise of stock options granted annually will not benefit from the 40% tax reduction
contained in the Act.
following the end of the tax year.the countdown to the deadline for flllng form 42 begins. In the subsequent 90 days, employers will need to collate the relevant data,accurately complete the form and submit it to HMRC on or by 6 July.Tax rules relating to 'not ordinarily resident' or 'non UK domiciled' empoyees will also have to be considered when reportlnevents on form 42.It pays to get form 42 completed on time and to et It rl ht.
Her Majesty’s Revenue and Customs (HMRC) amended the Pay As You Earn (PAYE) Regulations, with effect from April 6, 2011 to increase tax withheld on all payments made after employment has ceased and leaver form P45 has been issued to the employee.
The publication of the UK Finance Bill has revealed significant changes to the disguised remuneration proposal when compared with the first draft of the legislation released on December 9, 2010. For the most part, the changes contained in the Finance Bill give effect to carve-outs. While these carve-outs are welcomed, the scope of the legislation has also been widened in a number of respects and there are still many grey areas.
Her Majesty’s Revenue and Customs (HMRC) has issued an amendment to the Pay As You Earn (PAYE) Regulations, which will come into effect on April 6, 2011. The amendment will change the applicable PAYE tax code and, therefore, the corresponding withholding rate in specified circumstances.
At the end of 2010, the French government proposed, in the Loi de Finances Rectificative for 2010, the introduction of a new article 182 A ter to the French Tax Code (“article 182 A”). These proposals have since been adopted, and the new article 182 A will subject all equity awards held by French non-residents to income and social tax withholding at either vesting (e.g. in the case of restricted
In the past three years, international regulatory focus on remuneration has gripped the globe. The heart of the debate which arose in the context of remuneration structures in investment banking and their contribution to global financial crisis has extended past this into remuneration across a broad range of industries. This past year has seen a number of developments which have intensified in both the UK and Europe as we draw close to the year end. We look back at the year and consider where regulation and industry guidelines have emerged in the context of pay structures and recent developments in the area of transparency and taxation. We also provide a comprehensive review of the hugely anticipated new remuneration code the final version of which was published by the Financial Services Authority last Friday.
The French government has adopted the 2011 French Tax Act and Social Security Financing Act (“new legislation”). This new legislation has raised tax rates generally, and in particular, those applicable to equity income in France.
The Organisation for Economic Cooperation and Development (OECD) has amended the Model Tax Convention's Commentary regarding the allocation of taxing rights for short term assignments. The content and background of this revised commentary was discussed in the HC Alert of 5 July 2010.
For more details, download the full document.
Late last year, the IRS issued final regulations affecting the form and operation of tax-qualified
employee stock purchase plans (ESPPs), as well as final regulations affecting the tax reporting of
transfers of shares acquired from ESPPs and exercises of incentive stock options (ISOs). These
rules went into effect Jan. 1, 2010.
The new ESPP rules include some important clarifications that may necessitate plan amendments or
changes in administrative practices (see our previous newsletter on the 2008 proposed regulations).
In addition, employees must receive information reports that meet updated requirements by Jan. 31,
2010, for ESPP and ISO share transactions that occurred in 2009.
On November 16, 2009, Treasury released for publication the
final regulations under section 6039 of the Code ("Final
Regulations") dealing with return and information statements for
incentive stock options (ISOs) and section 423 employee stock
purchase plans (ESPPs).
The Belgian Parliament will shortly give its final approval to the social security totalization agreement between Belgium and Quebec. It is possible that this agreement will enter into force as early as February 2010, although March or April 2010 is more likely due to some outstanding formalities.
The Belgian tax authorities recently issued an administrative circular which clarified that subject to certain conditions, companies are able to extend the exercise period for stock options offered between November 2, 2002 and August 31, 2008, without negative Belgian tax consequences.
For more details, download the full document.
A Bill was submitted to the Belgian Parliament on February 3, 2009, proposing the extension of the term of an option without any adverse tax consequences.
For more details, download the full document.
The IRS, on January 9, 2009, issued Notice 2009-8 (the "Notice"),
its initial guidance interpreting Section 457A, which was enacted
on October 3, 2008 as part of the Emergency Economic
Stabilization Act of 2008 and which generally became effective
January 1, 2009.
We have prepared the attached detailed analysis of the Notice to
assist multinational employers in understanding Code Section
457A, given not only the potentially broad impact, but also the
limited transition period (until July 1, 2009, in some cases, and
December 31, 2011, in other cases) to make certain conforming
On 16 September 2008, the Greek Parliament passed a new tax law which introduces significant changes to the taxation of individuals participating in employee share plans. The Greek Ministry of Finance has now issued a Circular clarifying the new laws.
As part of an economic stimulus package, the Finnish government announced that the social security obligations paid by Finnish employers on employee income will be reduced in 2009 and eliminated in 2010.
This month, the Belgian tax authorities submitted a bill to Parliament concerning the taxation of stock
options. The bill is intended to help Belgian employees who were taxed on stock options at the time
of grant. Under the current Belgian tax regime for options, employees are subject to tax at grant if
they formally accept the option within 60 days of the offer date. The taxable event may be def
A bill has been converted into law in September 2008 for the amendment of the Capital Gains Tax Act (L 187) to tighten exit tax rules on shares.
On 16 September 2008, the Greek Parliament passed a new tax law which introduces significant changes to the taxation of individuals participating in employee share plans. The three most relevant areas that are affected are the taxation of stock option plans, dividends and capital gains arising from the transfer of listed shares.
Law 3697/2008, recently published in the Official Gazette, introduces amendments on income tax rates for individuals, taxation of dividends, taxation of capital gains from sale of listed shares, and taxation of stock options.
In a recent ruling, the Finnish Supreme Administrative Court approved the deduction of compensation paid by a Finnish subsidiary to its US parent on the basis of the US parent’s computational expenses incurred in granting its own shares to the employees of the Finnish subsidiary.
The Hong Kong Inland Revenue Department (IRD) has updated the FAQ issued on January 30, 2008 for Share-Based Payment Transactions in August 2008.
On July 2, 2008, the SEC staff issued a no-action letter to the Society of Corporate Secretaries and Governance Professionals permiting insiders to report same-day, same-way purchases and sales on an aggregate basis, i.e., on single line of Form 4 (or a late Form 5), even though the transactions occur at different prices.
Department of Taxation and Finance Explains the New Method to be
Used by Nonresidents and Part-year Residents to Determine New
York Source Compensation Income Attributable to Stock-based
The Hong Kong Inland Revenue Department (IRD) has not formally issued guidance on the tax treatment it will apply in respect of stock plans. Existing practical guidance (Department Interpretation & Practice Note 38) is limited to the tax treatment in respect of stock options.
The Greek Ministry of Finance has issued a written response to a specific query on the taxation of stock option plans operated by foreign companies in Greece either directly, or through their local affiliates.
The Internal Revenue Service (IRS) recently issued interim guidance on Section 409A of the Internal Revenue Code in the form of Notices 2006-100 and 2006-79.
Section 409A: Withholding and Reporting Requirements
This article summarizes the final regulations to clarify the federal income tax withholding procedures that apply to supplemental payments. These regulations implement the JOBS Act amendment of Code Section 3402, which requires withholding at the maximum individual tax rate for annual supplemental payments (from the company or affiliates) in excess of $1 million.
This is an update to [Deloitte's] Global Equity Update of
Responding to a recent decision in Matter of
Stuckless, N.Y. Tax App. Trib. (8/17/06), which
addressed the allocation of income from stock options
exercised by a nonresident, on October 10, 2006 the
New York State Department of Taxation & Finance
issued a proposed allocation rule for certain
nonresidents and part-year residents who are granted
stock options, stock appreciation rights, or restricted
stock. The regulations apply to 2006 and subsequent
years. The Department has also announced its policy
for 2005 and earlier years that are open under the
statute of limitations.
On February 3, 2006, the FASB released its fourth FASB Staff Position (FSP) providing interpretive and implementation guidance on the provisions of FASB Statement 123(R).
This GRIST was revised to provide further explanation of the old APB 25 and FAS 123 "grant date" definition and the changes in FAS 123(R) in the Grant date definition and Existing practice and new interpretation sections
The Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board
(FASB) have released additional guidance in regard to the new stock option expensing
provisions of Statement 123(R) that are scheduled to become effective this July. While there
have been recent press reports suggesting the SEC may be sympathetic to a further delay in
Statement 123(R)'s effective date, neither the SEC nor the FASB to date have initiated steps to
effect such a delay.
After much debate, expenses related to options and other
share-based payments are now required to appear on companies’
income statements. This standard, the Financial Accounting Standards
Board’s Statement of Financial Accounting Standards No. 123 (revised
2004), or FAS 123R, is effective for periods ending after June 15,
2005. Beyond the complicated and controversial accounting standard
itself, public companies must consider the impact of FAS 123R on
Management’s Discussion and Analysis of Financial Condition and
Results of Operations, or MD&A.
On December 16, 2004, the FASB released its new accounting standard for stock-based compensation. This standard supersedes APB Opinion No. 25, requiring companies to recognize an expense for all forms of stock-based compensation.
This Deloitte article summarizes the final ISO regs issued in 2004.
In August 2004, the IRS issued final regulations relating to incentive stock options (ISOs), which contain important guidance and changes relating to a number of issues affecting ISOs. This Perkins Coie Update summarizes some of the highlights of the final regulations and offers practical guidance.
A recent IRS private letter ruling (PLR 200212021) is a reminder that the circumstances under
which an Internal Revenue Code section 83(b) election can be revoked are narrow.
This outline discusses the potential impact of the Sarbanes-Oxley Act of 2002 on executive and equity-based compensation and the amendments to Items 201 and 601 of Regulation S-B, Items 201 and 601 of Regulation S-K and Form 10-K, Form 10-KSB, and Schedules 14A and 14C under the Securities Exchange Act of 1934, promulgated by the Securities and Exchange Commission (the “Commission”) in Release Nos. 33-8048 and 34‑45189.
The Corporate Counsel discusses an SEC interpretive letter reaffirming
its position that an independent trustee is not sufficient to distinguish the affiliate from the trust where the affiliate is the settlor and income beneficiary.