Over 200 global companies are currently using the Global Intelligence platform, which offers regulatory and tax information for more than 170 countries around the world. We collaborate with a tax firm with global reach and a network of law firms around the world to provide relevant information and updates in a timely manner. The Global Intelligence platform can generate streamlined reports to help you understand and manage your global share plan compliance. Our experienced team of associates can help you with any questions regarding the Global Intelligence platform.
This summary is intended to be a helpful overview of certain legal and tax considerations for companies offering equity compensation to employees around the world.
Global Intelligence is a cost-effective web-based solution that gives you the power to bring global share plan management in-house and understand your compliance obligations through a new lens. We want to redefine how you manage your global equity and transform the way you approach your plan’s taxation and regulatory compliance requirements for increased efficiency, ease of administration and cost savings.
Operating Equity Plans Around the World
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Methodology
For this summary, we have selected ten representative countries to review core compliance matters including:
Securities Laws
Exchange Control Requirements
Tax Consequences
In addition, each of the country information summaries includes statistics as to which award types Global Intelligence clients have implemented in that jurisdiction; decisions around which types of plans or awards to offer globally are driven by a company’s overall compensation strategy but may also be influenced in by the compliance burdens associated with offering that type of plan or award in a given country.
Companies considering implementing their equity program or offering awards outside their home jurisdiction should consult with their own legal and tax advisors. Global Intelligence does not provide legal or tax advice and this content is not tailored to any specific situation.
Practical considerations for managing global share plan compliance include:
Administration of Global Share Plans
A core element to review before offering an employee share plan globally is the securities regulatory framework surrounding the offer of shares to employees locally. Consideration of the relevant securities laws of each country is important before launching the plan, as is the periodic monitoring for changes in applicable rules.
Securities Laws
General Discussion of Tax and Regulatory Issues for Global Share Plans
Typical aspects to review are, among other things:
whether the offer may be considered a public offer under local law requiring the preparation of a prospectus
whether an exemption is available for employee offers, and the conditions of such exemption
whether a notification or filing is required to be made before and/or after the implementation of the plan
In many countries, the number of local employees being offered the equity and/or the value of that equity is relevant to address these matters.
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Another important area to understand before implementing a share plan globally is exchange control regulations. Governments can impose limitations on the movement of shares and currency in and out of their country. There may also be repatriation requirements and restrictions on the ownership of foreign shares.
In some cases, a permit or notification is required before funds can be transferred out of the country. Additionally, after having acquired foreign shares, employees may be subject to various reporting requirements relating to the ownership of foreign assets.
Exchange Controls
Exchange control considerations include, among others:
Exchange control laws can change quickly, and it is important to regularly monitor compliance with applicable regulations and restrictions.
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the value of transactions triggering notification requirements
•
the applicable thresholds for employees and companies to transfer funds, with or without permits
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permissions to hold shares
•
requirements to repatriate funds, including dividend payments
Understanding the tax consequences to employees as well as to the employer, including the employer’s tax reporting and/or withholding obligations, is critical to the proper administration of a global share plan, and for mitigating the risks and costs of offering a plan to employees outside of a company’s home jurisdiction. This is particularly critical because the tax consequences of share awards can vary widely among countries, making it important to consider whether the company’s equity compensation strategy needs to be adjusted to meet local requirements or to avoid undesirable tax outcomes.
Taxation
Other factors to consider for reducing the costs associated with operating a global share plan include, among others:
A country-by-country cost benefit analysis may be called for to determine whether it is feasible and cost effective to implement either a local tax favored arrangement and/or a recharge arrangement.
Local tax reporting and withholding obligations also need to be properly understood and implemented with the assistance of the local employers to ensure that the company will not be subject to fines or penalties in the administration of its global share plan. Companies that do not have internal expertise in a particular country should consider engaging outside tax advisors, such as a law or accounting firm with experience in this area.
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implementing tax favorable regimes in relevant jurisdictions to mitigate the income and social tax impacts to the employee and/or the employer
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recharging the costs of the share awards to the employing entities in those jurisdictions where local tax deductions may be available – while being mindful that in some jurisdictions, this could trigger a change to employee and/or employer tax consequences
Building time into your planning to complete a full review of the compliance obligations in relation to any grant and vesting events
Below is a summary of the regulatory and compliance information contained in the Global Intelligence platform for the ten countries listed below, which is commonly utilised by Global Intelligence clients in offering share plans to employees around the globe.
Country Reviews
The ease or difficulty of implementation and administration is driven not only by the specific local compliance requirements, but also by a company’s specific equity compensation structure and particular needs for the program overall.
france
china
canada
Australia
hong kong
vietnam
united kingdom
spain
philippines
israel
New laws effective as of 1 October 2022 introduce key changes to the regulatory framework governing offers of employee share scheme (ESS) awards to employees in Australia.
Securities Laws
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the offer documents must include certain warnings (and in the case of unlisted companies, certain additional information must be provided with the offer documents), and
•
the offer terms must provide that individuals cannot acquire ESS awards under the offer until 14 days after receiving the offer letter.
Australia
The changes, aimed at making it easier for both listed and unlisted companies to offer ESS awards to employees in Australia, insert a new statutory ‘ESS offer exemption’ into the Corporations Act, that effectively replaces the Australian Securities and Investments Commission (ASIC) Class Order 14/1000 for publicly traded companies and Class Order 14/1001 for privately held (i.e., unlisted) companies.
In contrast to the ASIC Class Orders, the ESS offer exemption distinguishes between ESS awards that do not involve any monetary payments from participants, such as performance rights and restricted stock units, from those that involve monetary payments from participants, such as stock options and employee stock purchase plans. In general, where the ESS awards do not involve monetary payments from participants, no conditions need to be satisfied for regulatory relief under the new ESS offer exemption, apart from a statement in the plan documentation that the offer is made under this exemption.
For ESS awards involving monetary payments from participants or which utilise an employee share trust, there are some additional requirements to satisfy for regulatory relief, most notably:
This information has been provided by our collaborator law firm in Australia, MinterEllison
Other key changes for broad regulatory relief to apply under the new framework include:
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For listed companies: where a participant is contributing towards the cost of an ESS award under a contribution arrangement (on either a post-tax or pre-tax basis), all payments or deductions must be held on trust (on behalf of the participant) in an account with an Australian authorized deposit-taking institution that is kept solely for that purpose;
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For unlisted companies: the base monetary limit, being the maximum amount a participant can pay in any 12-month period to acquire an ESS award, has increased to A$30,000 per year (Class Order 14/1001 limited the value of all ESS offers per participant to A$5,000 per year or less).
Alternatively, there are two general exemptions available from the requirement to file a prospectus with the ASIC:
1
offers to employees who are highly senior managers are exempt from any filing requirements in Australia; and
2
offers that will result in shares being issued to no more than 20 employees in any rolling 12-month period with a value of less than AUD 2 million are also exempt from any filing requirement.
There are no applicable exchange control limitations, but there is a reporting requirement to the Australian Transaction Reports and Analysis Centre (AUSTRAC) where funds equal to or greater than AUD 10,000 are transferred. If an Australian bank is assisting the participant with the transaction, the bank will file the report on the participant’s behalf. If there is no Australian bank involved in the transfer, the participant will be required to file the report.
Exchange Controls
For cash plans with the value of the cash award not depending on the value of the company’s share price or other external metric, no prospectus or registration requirements apply.
As a general rule, share plans in Australia are taxed at progressive income tax rates of up to 45% (for 2022-2023). Tax favorable arrangements can apply to most award types where particular conditions are satisfied. Tax favorable plans provide more beneficial tax treatment to employees, and, in certain cases, only up to specified monetary limits.
Taxation
Restricted stock plans can offer up to AUD 1,000 worth of shares tax free, provided various conditions are satisfied, including that the plan be offered to at least 75% of employees with more than three years of service and must restrict the right to dispose of the shares for at least three years (or until termination of employment, if earlier).
For companies offering employee share purchase plans, a tax-deferred salary sacrifice plan is available. This means that employees can sacrifice a portion of their salary, up to a maximum of AUD 5,000 per year, and instead receive shares that qualify for tax deferral. Provided various conditions under the tax-deferred salary sacrifice plan are satisfied, employees will usually be taxed when the restrictions on the shares lift, with a maximum deferral period of up to 15 years from the date of grant.
Other
In Australia, there is generally no employer withholding obligation on income deriving from employee share plans, and it is the employee’s responsibility to calculate and pay any applicable income and social taxes to the tax authorities.
For cash awards, the tax treatment is different: any employee social and income taxes must be withheld by the employer.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in Australia.
Usage
RSP
Plan Type
Other
Translation of plan materials is required in the province of Quebec unless a proper waiver is obtained from employees.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in Canada.
Usage
Plan Type
As a general rule, share plans in Canada are taxed at progressive income tax rates of up to 33% (for 2023). In addition, provincial taxes will apply. Social insurance contributions are also generally levied on share plan income.
It is important to ensure that any full value stock awards granted to employees in Canada do not inadvertently run afoul of the salary deferral arrangement (SDA) rules. Generally, an award would be considered to fall under the SDA rules if a payment is made to the employee after December 31 of the third calendar year after the first year of service to which the award relates. The SDA rules do not apply to an employee stock option unless the option permits the issuer to provide a cash equivalent to the employee in lieu of issuing stock.
Taxation
There are no limits or restrictions from an exchange control perspective when operating employee share plans in Canada.
Exchange Controls
Companies offering employee share plans in Canada can generally operate in reliance on exemptions from the prospectus and registration requirements, as long as participation in the plan is voluntary and applicable resale restrictions are complied with.
Securities Laws
This information has been provided by our collaborator law firm in Canada, Stikeman Elliott LLP
Canada
Other
ISAFE approval is required for any recharge of share plan costs by a non-Chinese listed company to the local employing entity in China and it is unlikely this approval would be given, as local regulations do not specifically allow for chargeback payments.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in China.
Usage
Plan Type
The tax rates applicable to income from employee share plans in China are progressive rates of up to 45% (for 2023). Social taxes are also payable on employee equity income, which can vary by region. Favorable tax treatment, which may allow employees to apply a lower overall tax rate on their share plan benefits, may be available for plans that are registered with the local Chinese tax bureau.
Taxation
Under the regulations issued by the Central Bank and State Administration of Foreign Exchange ("SAFE"), non-Chinese public companies granting share awards to Chinese employees must register their share plans by filing an application for approval with the applicable SAFE office, generally in advance of first offering the plan in China or within 3 months thereafter.
Exchange Controls
Different securities laws apply to private versus publicly traded companies. An offer of listed shares under an employee share plan will not be deemed a public offer under Chinese securities laws, meaning that an offer of shares by a publicly traded foreign parent company to employees in China will not trigger any securities laws compliance obligations. However, there is no similar exemption for foreign private companies.
Generally, there are no securities law restrictions for the offer of cash-based awards. However, in the case of a phantom equity plan, the payments should generally be made in local currency through local payroll.
Securities Laws
This information has been provided by our collaborator law firm in China, MHP Law Firm
China
Obtaining SAFE approval for non-Chinese listed companies is complex but relatively common. As part of the registration process, the local employer is required to establish a special local bank account through which all funds under the plan must flow. Companies are also required to repatriate all share plan proceeds realised by Chinese nationals through this approved bank account.
Once registration is completed, quarterly reporting requirements apply in most provinces. Annual re-registration may also be required in certain provinces. Any material changes to the plan or related arrangements and administration are required to be reported to SAFE within three months.
Where the awards are cash-based or cash-settled (and the awards are paid via local payroll without direct international fund transfers to participants), it may be possible to avoid exchange control issues.
Note that SAFE registration is not generally available for private companies.
Practical Considerations
Although the exchange control laws in China at first seem complex, with local support, once the registration is completed, the regular filings should not be challenging. We are seeing companies increasingly go through with a China SAFE registration with as few as ten local participants; local support can help to minimise cost and time demands on compliance resources.
Other
There is no legal requirement to make a translation available to employees, although it is recommended for enforceability purposes. If a Works Council has been established in France, consultation with such employee representative body may be required before implementing an share plan.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in France.
Usage
Plan Type
The tax rates applicable to income from employee share plans in France are progressive rates of up to 45% (as of 2023); combined social security rates can be as high as 22.23% for employees and 47.963% for employers.
Effective January 2019, French tax laws were changed to mandate withholding for all employment-related income, including income from share awards, for all French residents. However, French tax-qualified RSUs and stock options are out of the scope of the new withholding system, and the responsibility for paying tax on the gains generally rests with the employee.
Taxation
There are no applicable exchange control limitations, but cross-border transactions with a value equal to or exceeding EUR 10,000 which do not use a financial institution require reporting to the customs and excise authorities.
Exchange Controls
There are no major issues from a securities law perspective in relation to the offer of an employee share plan in France. The EU Prospectus Regulation (EUPR) came into force in July 2019 providing for, among other things, an exemption from the prospectus requirement for employee share plans, provided that certain information is made available to employees.
Securities Laws
This information has been provided by our collaborator law firm in France, Berry Avocats
France
Practical Considerations
Although the securities and exchange control laws that apply to employee equity in France are relatively straightforward, taxation rules and tax favorable regimes have changed frequently in recent years. Companies should pay particular attention to the regime applicable to the different plan types and timeframes, and ensure that shareholder approval has been obtained in compliance with local requirements. Local lawyer advice is recommended to ensure plan rules are compliant and appropriate tax information is made available to participants.
Other
In Hong Kong, there is no employer withholding obligation on income deriving from employee share plans, and it is the employee’s responsibility to pay the tax through the annual tax return assessment.
Notably, payroll deductions may be unlawful for the purposes of participating in an employee share purchase plan. As a result, many companies ask employees to provide a cheque or do a bank transfer under the terms of an ESPP offered in Hong Kong.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in Hong Kong.
Usage
Plan Type
In Hong Kong, employee share plan awards are subject to progressive income tax rates of up to 17% (in 2022). There are no social taxes or additional taxes payable on the sale of the shares.
Employees permanently departing Hong Kong can elect a deemed vesting or deemed exercise upon departure, as applicable. Pursuant to the employee’s election, the tax liability can be determined either on the basis of a deemed vesting/exercise on any day during the 7-day period preceding the submission of the final individual tax return, or within three months from the date of the employee's permanent departure from Hong Kong.
Taxation
There are no restrictive exchange control regulations in Hong Kong relating to the offer of employee share plans.
Exchange Controls
From a securities law perspective, there are no filings or registrations to be completed when offering employee share plans in Hong Kong, although employees should be provided with an appropriate notice specifying, among other things, that shares cannot be sold for at least 6 months after acquisition.
Securities Laws
This information has been provided by our collaborator law firm in Hong Kong, Vivien Chan & Co.
Hong Kong
Other
Whether a local tax deduction is available where a recharge agreement has been implemented depends on how the employees are taxed on their share awards; therefore, proper planning is required to determine the optimal overall tax consequences to the employer and employees for share awards offered in Israel.
Companies are encouraged, but not required, to translate the plan documents into Hebrew when offering share plans in Israel.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in Israel.
Usage
Plan Type
As a general matter, Israeli law provides that awards granted to employees are taxable at the time of sale (with the exception of restricted shares which may be taxable at grant); however, the entire gain in such case is treated as income from employment, and subject to income tax at marginal income tax rates of up to 50% (for 2023), as well as social security contributions.
Any such gains are also subject to employer withholding and reporting requirements, which can present administrative difficulties because the withholding obligation is typically deferred until sale. It is possible in certain cases for companies to apply for or rely on a “green track” ruling which allows for taxation at purchase for share purchase plans, and at vesting for restricted share units, with any further gains at sale taxable at capital gains rates (25% in 2023); where a “green track” ruling is available, the employer can fulfil its withholding obligations at purchase or vest, as the case may be, rather than at sale.
More beneficial tax treatment is available if a trustee is engaged by the company and a specific sub-plan is established to allow for compliance with the requirements of the “trustee track”, as it is commonly referred to under Israeli tax regulations. The conditions include a 12- or 24-month holding period, depending on the tax track. Submission of the Plan and the specific sub-plan to the Israeli tax authorities is required to implement this type of tax favored arrangement.
Under an approved trustee plan, a company may choose between applying the regular employment income track or the capital gains track. If applying the regular employment income track, the employee’s income will be classified as ordinary income at sale and will be taxed at marginal rates, including social security contributions. If applying the capital gains track, part or all of the gain, depending on whether the issuer is public or private, will be taxable as a capital gain; a portion may also be taxable as employment income at the time of sale. If the employee sells the shares before the expiration of the holding period, the entire gain at sale will be taxed as ordinary income.
Taxation
There are no limits or restrictions from an exchange control perspective for the offer of share awards in Israel.
Exchange Controls
Companies are subject to securities regulatory requirements when offering equity to employees in Israel. However, exemptions from prospectus requirements are available for both public and private issuers.
For both publicly traded and private companies, an offer to more than 35 people in a rolling 12-month period generally requires a securities prospectus to be filed. However, a company may apply for an exemption from this requirement for offers under an employee share plan. Generally, the securities regulator will grant an exemption subject to compliance with various disclosure requirements.
Private companies are also exempt from Israeli prospectus requirements provided that the value of the offer does not exceed a specific monetary threshold, and the total number of shares does not exceed 10% of the company’s outstanding capital on a fully diluted basis.
Securities Laws
This information has been provided by our collaborator law firm in Israel, Benjamini & Co. Law Offices
Israel
Practical Considerations
Where it is not practical to set up a trustee structure in Israel, companies may also consider applying to the tax authorities for a tax ruling where the benefit under the plan realised at sale may be taxed as a capital gain, thereby releasing the employer from the withholding obligation at the time of sale, compliance with which can cause practical difficulties. Under the ‘green track’ procedure, the ruling has been streamlined and can be applied to a range of employee share plans.
Other
Many non-Philippine companies operate cash-based plans or only offer cash-settled awards in the Philippines to alleviate the complex securities filing requirement. Where share-based awards are used, companies should be aware that a recharge arrangement generally triggers tax withholding obligations and employee social taxes (subject to a monthly cap) that would not otherwise apply to such awards.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in the Philippines.
Usage
Plan Type
Employee share awards are subject to progressive income tax rates of up to 35% (in 2023), as well as employer social taxes. Note that awards received by managerial or supervisory employees are no longer subject to a fringe benefit tax, and instead are subject to income and social taxes in the same way as all other employees.
Upon sale of the shares, any tax on capital gains is payable at the same rates as individual income tax. However, if the employee holds the shares for more than 12 months before sale, only 50% of the gain will be subject to capital gains tax.
Taxation
There are no restrictive exchange control regulations applicable in the Philippines.
Exchange Controls
In order to rely on the prospectus exemption available for employee share plans, foreign companies are generally required to prepare a filing and receive a confirmation of exemption from the Philippines Securities and Exchange Commission. This filing is relatively complex and can take several months to complete.
Once the confirmation of exemption is received, an annual report must be filed with the regulator providing updated details regarding awards and participants under the plan.
The requirement to make a securities filing can be avoided by mandating that shares be sold immediately following vesting (in case of restricted stock and restricted stock unit awards) or by mandating a cashless exercise mechanism (in case of stock options).
Securities Laws
This information has been provided by our collaborator law firm in Philippines, Quasha Ancheta Pena & Nolasco
Philippines
Practical Considerations
If companies are planning to complete the securities exemption filing in the Philippines, we recommend that a local representative or firm be identified to provide all the local documentation and information required to support both the initial and ongoing filings. A lead time of six months is often needed; however, the securities regulator is not expected to challenge an offer under the plan so long as the filing is in process at the time the offer is made.
Other
For employee share purchase plans, the employer can make payroll deductions so long as written consent has been obtained from the employee and no more than 30% of the employee’s gross income is deducted.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in Spain.
Usage
Plan Type
The income tax rates applicable to share plans income in Spain are progressive, up to 47% (for 2023) in general, although the actual percentage will depend on the autonomous region where the participant resides . Share plan income is also subject to social taxes.
An annual individual income tax exemption of EUR 12,000 is available for employee share plan benefits provided certain requirements are satisfied, including that the awards must be made on the same conditions to all employees and shares must be held for at least three years after acquisition. A more favorable exemption of up to EUR 50,000 is available for qualifying start-ups.
Taxation
There are no restrictive exchange control regulations in Spain applicable to offers under employee share plans.
Exchange Controls
Securities law compliance associated with offering employee share plans in Spain is straightforward. Under the EU Prospectus Regulation, employee share scheme offers are exempt from prospectus requirements provided that certain information is made available to employees.
Securities Laws
This information has been provided by our collaborator law firm in Spain, Cuatrecasas
Spain
Other
Local legal advice is generally required to implement a tax favored arrangement in the U.K., including the establishment of a trust where required.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in the U.K.
Usage
Plan Type
The income tax rates applicable to share plans income are progressive, up to 45% (for 2023-2024).
Under the Save-As-You-Earn scheme, options or other purchase rights, which must be offered to employees broadly, can be granted at a discount of up to 20% of the fair market value on the grant date. Employees are permitted to save up to GBP 500 per month from post-tax earnings over a period of three or five years. At the end of this period, they can exercise the option or right to purchase shares at any time over the following six months (or, alternatively, can withdraw and retain the savings and predetermined tax-free interest). If the applicable requirements are met, the acquisition of shares upon exercise is free of income tax and NICs.
The Share Incentive Plan (SIP) is another tax advantaged all employee share plan. No income tax or NICs are payable on the value of the shares, provided they are held for at least five years, and all applicable conditions are met. Under the SIP, employers can grant employees free shares, up to GBP 3,600 per employee annually; in addition, partnership shares can be purchased by employees from their pre-tax salary for up to GBP 1,800 or 10% of their salary per year (whichever is lower). Matching shares can be also offered, with a maximum of two matching shares for every partnership share purchased.
The Enterprise Management Incentive is another tax favored share option scheme that may be utilized by smaller companies with assets of GBP 30 million or less.
Taxation
There are no restrictive exchange control regulations in the U.K. for the offering of employee share plans.
Exchange Controls
At this time, the securities laws applicable to employee share plans that were in place before Brexit continue to apply in the U.K., meaning that an employee share scheme is exempt from prospectus requirements provided that certain information is made available to employees.
Securities Laws
This information has been provided by our collaborator law firm in United Kingdom, Pinsent Masons
United Kingdom
There are generally no securities law restrictions for an offer of cash-based awards. However, if phantom share awards are granted to employees (other than cash settled options or stock appreciation rights), careful consideration should be taken as to whether the award represents a “contract for differences” for U.K. securities law purposes.
Other
Recharging the costs of the plan to the local subsidiary may result in the foreign parent company becoming subject to additional corporate tax in Vietnam. Any such arrangement must be carefully reviewed in advance to ensure that it does not give rise to adverse tax consequences.
Below is a summary of the types of plans or awards offered by Global Intelligence clients in Vietnam.
Usage
Plan Type
Employee share awards are subject to personal income tax (PIT) at the time the underlying shares are sold. Tax payable includes PIT on the portion of the gain treated as employment income and taxed at progressive rates of up to 35% (in 2023), as well as PIT of 0.1% on the entire sale proceeds.
Mandatory income tax withholding for the employer at the time of sale on the portion of the gain treated as employment income, as well as on any dividends received, can present administrative challenges.
Taxation
Exchange control compliance in Vietnam is relatively complex. The exchange control regulations issued by the State Bank of Vietnam ("SBV") require foreign companies granting share awards to Vietnamese nationals to register the share plan with the SBV and comply with numerous other obligations.
Exchange Controls
There are no securities law registration or filing requirements in Vietnam for employee share plans, provided the shares being offered are not traded on any Vietnamese exchange market.
Securities Laws
This information has been provided by our collaborator law firm in Vietnam, Russin & Vecchi
Vietnam
Among other things, companies are required to establish a local bank account through which all funds under the share plan must flow. Note that it is difficult to obtain SBV approval for an employee stock purchase plan, and the SBV will generally consider such requests on a case-by-case basis.
Once registration is completed, quarterly and other reporting requirements apply. Further, repatriation of proceeds into Vietnam resulting from the sale of share awards held by local participants is required.
Many non-Vietnamese companies operate cash-based plans or only offer cash-settled awards in Vietnam, with proceeds paid via local payroll without direct international fund transfers to participants, in order to alleviate the exchange control compliance requirements noted above.
Practical Considerations
Although the exchange control laws in Vietnam are complex, a local law firm can assist with the registration process for non-cash awards.
2%
4%
71%
22%
2%
4%
72%
21%
2%
3%
70%
23%
2%
5%
2%
71%
23%
6%
2%
70%
22%
1%
22%
72%
5%
9%
72%
19%
2%
4%
71%
23%
2%
3%
75%
20%
1%
4%
76%
20%
Securities Laws
Exchange Controls
Taxation
1/4
2/4
3/4
Please click on the links below to review country-specific regulatory considerations.
50% of the gain from the exercise of stock options is generally excludable from taxation.
50%
Employee stock options have long enjoyed favorable tax treatment under the Canadian federal tax system. Specifically, 50% of the gain from the exercise of stock options is generally excludable from taxation, meaning that option holders are essentially taxed at the same rate as capital gains on the entirety of their qualifying stock option benefits. Additional favorable tax treatment is available for stock options issued by a Canadian controlled private corporation (CCPC), where taxation is deferred until the time of sale. In 2021, the federal government passed legislation to limit the extent of the stock option benefit eligible for the 50% deduction to an annual cap of CAD 200,000 for option grants issued on or after July 1, 2021 by larger companies (but in any case excluding CCPCs).
This benefit is not subject to income tax if employees hold the shares for a minimum of 5 years. Additionally, no capital gains tax is payable if the proceeds are reinvested in the Plan.
5
years
Because of the high overall tax burden in France, the principal aspect companies should pay attention to is whether it is worthwhile to offer French tax-qualified share awards. The tax favorable share scheme for options and restricted share units allows for reduced income and social tax rates, and a deferral of taxation until the time of sale. The tax favorable regime is complex and requires proper planning to ensure conditions can be satisfied, including obtaining shareholder approval of the plan. It may be desirable to adopt a separate sub-plan for French tax qualified awards.
Among the conditions to be fulfilled for restricted share unit plans made from January 2018 onward, there is a minimum one-year vesting period, plus a minimum one year holding period, or a minimum holding period of two years between grant and sale. However, there is no longer any holding period imposed for stock option plans.
For employee purchase plans, there is a type of tax deferred saving plan known as a PEE (Plans d’Epargne d’Entreprise) whereby employees can make regular contributions to acquire shares, subject to a maximum contribution of 25% of their annual salary, with matching contributions by the employer.
Employee equity plan awards are subject to progressive income tax rates of up to 17% in Hong Kong.
17%
in 2022
In Israel subject to income tax at marginal income tax rates of up to 50% (for 2023), as well as social security contributions.
50%
Employee share awards are subject to progressive income tax rates of up to 35% (in 2023)
35%
The income tax rates applicable to share plans income in Spain are progressive, up to 47% (for 2023)
47%
There is a provision in U.K. tax law that allows the employer to transfer its NIC liability (13.8% in 2023-2024) to employees, who are then able to obtain a partial tax credit for this additional tax burden.
13.8%
Cash plans are generally subject to income and social taxes (National Insurance Contributions or NICs) on receipt, whilst stock options are taxable at exercise, share purchase plans are taxable at purchase and restricted share plans and restricted share units are taxable at vesting. An election to tax restricted shares at the time of grant may be available. In addition, for plans other than cash plans, there is a provision in U.K. tax law that allows the employer to transfer its NIC liability (13.8% in 2023-2024) to employees, who are then able to obtain a partial tax credit for this additional tax burden.
There are several different share schemes available that offer beneficial tax treatment, provided that all necessary conditions are satisfied. Under the Company Share Option Plan (CSOP), effective April 6, 2023, options valued at up to GBP 60,000 can be granted on a discretionary basis to employees, with an exercise price equal to or greater than fair market value at the date of grant. Such options must be exercised between three and ten years from the grant date. If requirements are met, the acquisition of shares upon exercise is free of income tax and NICs.
Many companies now use the internet or their intranet to communicate and deliver awards. This can include electronic ‘click through’ acceptance of awards, which may raise issues around the enforceability of awards accepted in this way in certain countries. While it is generally understood that electronic acceptance is effective, in certain jurisdictions, electronic acceptance is not always considered valid and hard copy acceptance may need to be considered as an alternative.
Electronic Communications
4/4
The speed at which compliance obligations can change does not make it easy for companies to remain compliant. We suggest companies adopt a structured approach and strategy to address and manage the ongoing challenges of operating employee share plans globally.
Electronic Communications
Making full use of technology to allocate your time and compliance budget efficiently, ensuring focus on the more challenging countries while maintaining regular review across all countries over the life of the plan
Performing a cost-benefit analysis to determine whether it is feasible to implement a local tax favored arrangement and/or a local recharge arrangement
Building a team of cross-functional experts internally, including engaging capable local representatives or firms to assist with local documentation and filings
Using tools that allow you to regularly and systematically review relevant information in relation to the operation of your share plans and identify any new developments
Monitoring and recording actions taken and decisions made for future reference and audit
Reviewing both parent company and local company tax with holding and/or reporting obligations and determining who will be responsible for completing these
Carefully considering employee communications to ensure the full value of the benefit to participants, including providing information on employee reporting obligations and tax information
CANADA
China
Australia
France
Canada
Hong Kong
China
Israel
France
Philippines
Hong Kong
Spain
Israel
United Kingdom
Philippines
Vietnam
Spain
Australia
United KIngdom
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This summary does not purport to contain complete information regarding tax or regulatory compliance for the countries listed and should not be considered as either legal or tax advice. Please reach out to our Global Intelligence team with any questions about how the Global Intelligence application can help you in offering and administering your global share plans.
Morgan Stanley at Work and Global Intelligence services are provided by Morgan Stanley Smith Barney LLC, member SIPC, and its affiliates, all wholly owned subsidiaries of Morgan Stanley.Morgan Stanley Smith Barney LLC and its affiliates, employees and Financial Advisors do not provide legal or tax advice. Individuals should consult with their tax/legal advisors before making any tax/legal-related investment decisions.The information is sourced from third parties, may not be current and is subject to change without notice. Morgan Stanley at Work makes no representations or warranties concerning the accuracy, completeness or timeliness of the information and is not implying an affiliation, sponsorship or endorsement with/of any third parties or views expressed by such parties. Any views expressed in the information are solely those of the third-party source. Morgan Stanley at Work shall have no liability arising out of, or in connection with, the information, including any loss caused by use of, or reliance on, the information. All information made available by Morgan Stanley at Work is subject to the terms of the written agreement entered into between Morgan Stanley at Work and your company.© 2023 Morgan Stanley. All rights reserved. Global Intelligence and all product marks and logos are trademarks of Morgan Stanley.
© 2023 Morgan Stanley Smith Barney LLC. Member SIPC.
CRC 5672752 05/23 CS 667616-3318672 05/23
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