Global Regulatory & Tax Update: June 2018

Country alerts

  Armenia: Mandatory pension contribution as of July 1, 2018

The legal requirement for the contribution of employee in private sector born after 1973 will be as follows as from July 1, 2018:

  • 5 per cent of their monthly wage if it is under AMD 500,000 or
  • 10 per cent of their monthly wage less AMD 25,000 if their monthly earnings are AMD 500,000 or more subject to a maximum monthly contribution of AMD 50,000

Contributions will be invested with either Amundi-ACBA Asset Management or C-Quadrat Ampega Asset Management, two approved fund providers.

As for employers, they should ensure that employees are aware of this upcoming change and should prepare to withhold contributions and direct them to the fund selected by the employee.

Myanmar: Change of financial year only applicable for banks and financial institutions

In our news alert from March 2018 we informed about the change of the financial and tax year in Myanmar. The Internal Revenue Department has now issued on 9 May 2018 a LTO Letter No. 5274 stating that only banks and financial institutions are required to adopt the new financial year from October 1 2018 in line with the Central Bank of Myanmar’s latest reporting requirements.

As a result, the change of the financial year from April 1 until March 31 to October 1 until September 30 is applicable only to banks, financial institutions and state-owned enterprises. Any other taxpayer including companies and individuals will continue to follow the financial year from  April 1 until March 31.

Our Global Compliance Network Law Firm, VDB Loi in Myanmar, would be happy to  provide you with more information. For any further information feel free to reach out to Ngwe Lin Myat Chit at

Shareworks Global Compliance comment: We would like to point out that the change of the financial year will not affect companies’ employees.

  Romania: Amendment of Form 112 on employer’s withholding obligation

Our last newsletter informed about the significant changes to income tax and the social security contributions. On May 10, 2018, the Official Gazette of Romania (no. 402) published amendments on the format, content, and filing and handling procedures relating to Form 112 on the employers’ obligations to withhold individual income tax and social security contributions from their employees’ salaries. These amendments reflect the changes to the social security system applicable from January 1, 2018 accordingly.

Shareworks Global Compliance comment: We recommend to review and update your withholding and reporting documentation to the local tax authority

  United Kingdom: Sharesave participants can take a longer “payment holiday” from 1 September, 2018

From September 1, 2018, participants in UK tax-advantaged Sharesave (SAYE) plans will be able to miss up to twelve monthly contributions and still retain their right to buy shares under the plan. Companies should be working with their administrators to prepare for this change and to agree appropriate communications to both new and existing participants.

What is changing?
 Sharesave, also known as SAYE, is a type of ‘all employee’ tax-advantaged share plan in the UK. Employees who join a Sharesave plan agree to make a fixed monthly contribution from their after-tax salary each month over the life of the plan, which is usually three years – it may also, or instead, be five years. This money is then used to buy shares in their employer company (or parent company), generally buying the shares at a discount to the share price when they joined the plan.

The current regime allows those participating in a Sharesave plan to miss monthly contributions from salary for up to six months without having to give up participation in the plan. The break was designed to benefit employees, such as those on maternity or parental leave, who were temporarily unable to afford to contribute to the plan.  From September 1, 2018, the regime will be amended so that any participant can miss up to twelve monthly contributions and still continue as a participant in the plan.

This is good news for employers and Sharesave participants as it makes Sharesave more flexible, reflecting increasing periods of maternity and parental leave and modern working practices more generally.

How will the change take effect?
Sharesave arrangements involve a form of savings contract, the terms of which are set out in a “Prospectus” published by HM Revenue & Customs (HMRC). The new twelve month contribution holiday will be provided for in an updated Prospectus, to be published by HMRC in advance of September 1, 2018.

For existing savings contracts, HMRC has indicated that companies will need to work with their Sharesave administrators to determine whether the amendment to the Prospectus will be sufficient for the change to take effect or whether any further action will be required.

What about plan rules?

Some Sharesave plan rules provide that the right to buy shares under the Sharesave plan will lapse when a seventh monthly contribution has been missed, reflecting the current maximum of six missed contributions.

HMRC has made some public statements suggesting that such rules will be treated as automatically amended to reflect the new maximum of twelve missed contributions, although this is not yet included in formal published guidance. In any event, we would recommend amending the rules for the avoidance of any doubt and to reduce the risk of the rules being misinterpreted in future.

What action is required?

Companies should be taking the following actions now, so that everything is in place for this change from September 1, 2018:

  • discuss implementing the change with your Sharesave administrator
  • review plan rules to see whether it would be appropriate to update these
  • update participant booklets/FAQs to reflect the new maximum number of contributions which can be missed
  • agree a communications strategy so that current and new participants will be aware of the change
  • consider any changes to Global Sharesave arrangements to align with the new UK position

Our UK Global Compliance Network Law Firm, Pinsent Masons, would be happy to provide you with more information. For further assistance feel free to contact Suzannah Crookes at

Shareworks Global Compliance comment: We recommend that companies speak with their Sharesave administrators to ensure that the amendment will take effect accordingly.

  United States of America: SEC to increase Rule 701 disclosure threshold to USD 10 million

On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act which, among other things, directs the Securities and Exchange Commission (SEC) to adopt amendments to Rule 701 under the US Securities Act of 1933 (Securities Act) that would increase the Rule 701 disclosure threshold from USD 5 million to USD 10 million, with subsequent increases every 5 years to account for inflation. However, these changes to Rule 701 are not self-executing and will likely undergo the lengthy rulemaking process of the SEC.

Rule 701 is the primary exemption used by companies, including foreign issuers, who are not subject to reporting under the US Securities Exchange Act of 1934 to issue equity incentive awards to employees and certain consultants without registering the securities under the Securities Act. Rule 701 allows non-reporting companies to issue securities so long as they are pursuant to a written compensatory benefit plan. Additionally, the aggregate amount of securities sold in reliance on Rule 701 within any 12 month period (either on a rolling or annual basis) must not exceed the greatest of the following: (i) USD 1 million, (ii) 15 per cent of the total assets of the issuer, or (iii) 15 per cent of all outstanding securities of the same class of the issuer.

Rule 701(e) requires enhanced disclosure to be made to recipients of such securities when the total sales of such securities exceed USD 5 million within any 12 month period (either on a rolling or annual basis). The issuer must disclose to all recipients of such securities within that 12 month period (i) a summary of the applicable equity incentive plan’s material terms, (ii) an explanation of the risk factors associated with investment in the securities, and (iii) financial statements of the issuer in accordance with US GAAP, or reconciled to US GAAP if its financial statements are not prepared in accordance with IFRS as issued by the International Accounting Standards Board.  The required financial statements must be as of a date no more than 180 days before the sale of securities in reliance on Rule 701.  This has been an issue for companies that only issue annual and semi-annual financial statements.

The new law mandates that the SEC change the Rule 701(e) threshold from USD 5 million to USD 10 million within 60 days after the enactment of the law. For all companies that issue securities under Rule 701, the threshold increase provides more flexibility on timing and reduces the costs of compliance.

Although the new law requires the SEC to amend Rule 701(e) within 60 days after enactment of the law, the SEC rulemaking process, which includes the release of proposed rules and a comment period, will likely require more than 60 days. Nevertheless, when changes of this type occur, the SEC will generally issue transition guidance upon which a company can rely to address questions and concerns.

Assuming the SEC in 2018 adopts an amendment to Rule 701, how will the new threshold apply where a company is in the middle of a 12 month testing period?  For example, if the company has already exceeded the USD 5 million threshold, must the company provide the required disclosures or will the USD 10 million threshold apply to all sales during the current testing period, even those that occurred prior to the effective date of the increase? Or, will the increased  threshold be applied only prospectively, in which case would it apply to a current testing period that straddles the enactment of the new law, and, if so, how?

Consider the following fact scenarios if on July 23, 2018, the SEC adopts an amendment to Rule 701:

1)    Issuer is using the calendar year to measure sales under an employee share purchase plan.  On June 23, 2018, it has “sales” of USD 4 million shares under Rule 701.  Can it sell USD 6 million additional shares prior to December 31, 2018 without providing the disclosure? Or only USD 1 million additional shares?

2)    Issuer is using the calendar year to measure sales under a stock option plan.  As of June 1, 2018, it has granted stock options valued at USD 6 million which do not vest until December 31, 2018. Disclosure would not be required until a “reasonable period before the date of sale”, i.e. the exercise date.  Will the new USD 10 million threshold apply to these stock options so that no disclosure is required? What if the vesting date was May 31, 2019?

The SEC is expected to release transitional guidance, but until such guidance is provided, issuers should continue to comply with the current rule

Our US Global Compliance Network Law Firm, Pillsbury Winthrop Shaw Pittman LLP, would be happy to assist you. Feel free to reach out to the Executive Compensation team for additional information about these changes.

  Vietnam: Foreign exchange issues

Employee Share Plans can vary significantly, one from the other. Under one variation, widely used by multinational companies, an offshore parent company awards shares to its own employees and to the employees of its subsidiaries around the world. In order to be compliant under Vietnamese Laws the offshore parent plans have foreign exchange issues to overcome.

The act of owning offshore shares under a Share Plan is considered to be a form of indirect offshore investment. Decree 135 provides that the SBVN has the power to approve a bonus share offshore plan. No approval should be required from the SBVN if the plan does not involve the issue of shares and there is no remittance of funds outside of Vietnam. However, this will depend on the particular features of the plan. It is prudent to check with local counsel to ensure that the plan complies with the SBVN’s current practice. There are two types of offering offshore shares to Vietnamese employees under Circular 10:

  • direct offer of shares
  • offer of right to purchase shares on preferential terms

A Free Share Plan, in which free shares are given to employees also requires the SBVN’s approval. Under this Free Share Plan the offshore shares are awarded to employees free of charge, i.e. neither the participating employee nor the local employer is required to pay or contribute anything for the shares. The reason is that owning offshore shares is currently treated as a form of offshore indirect investment.

Circular 10 provides that a Vietnamese employee may use his own foreign currency account to purchase awarded shares. He may use his salary and bonus in order to buy foreign currency at a bank in Vietnam to make payment for the awarded shares. The local employer will have to obtain SBVN’s approval before implementation of the Share Plans (e.g. before the Vietnamese employees make payment for the shares).

Next month we will discuss how a Share Plan can operate in Vietnam if foreign exchange is not used to purchase shares and what alternatives exist.

Our Vietnam Global Compliance Network Law Firm, Russin & Vecchi, would be happy to provide you with more information. For further assistance feel free to contact Diu Dao Hong at

Shareworks Global Compliance comment: We recommend companies to consider offering a cash-settled share plans, as it might be possible to avoid Exchange Controls Issues.

Upcoming filing and reporting deadlines

  South Korea: Equity reporting

June 30, 2018
Affects: Employee

Korean tax residents are required to report any foreign bank and financial accounts (including foreign brokerage accounts) to the Korean National Tax Service by 30 June of the following year if the aggregate balance of these accounts exceeds KRW 1,000,000,000 (approximately USD 912,000) at the end of any month during a calendar year.
Our collaborating law firm in South Korea (Shin & Kim) is happy to assist, should you need any support with this.

  China: Quarterly report

July 3, 2018
Affects: Local company

Companies that have obtained SAFE approval for their equity plans in China are required to file quarterly reports with their local SAFE office within three business days of the end of the relevant quarter.
Our collaborating law firm in China (Martin Hu & Partners (MHP)) is happy to assist, should you need any support with this.

  Australia: Employee share scheme statement

July 14, 2018
Affects: Local company

The annual reporting deadline for Australian employers is approaching. Companies that have a presence or employees in Australia and operate an equity plan have to issue an Employee Share Scheme Statement to each employee who was granted an equity award that vested in the prior tax year by July 14. In addition, an Employee Share Scheme Annual Report has to be filed with the Australian Taxation Office by August 14.Our collaborating law firm in Australia (Minter Ellison) is happy to assist, should you need any support with this.

  India: Indian employer tax filings

July 15, 2018
Affects: Local company

Indian employers are required to file Form 24Q with the Indian tax authorities on a quarterly basis. The quarterly returns report information on employment income paid to employees (including from share-settled awards) as well as taxes withheld.

The quarterly returns must be submitted by:

  • Quarter ending March, 31: April, 15
  • Quarter ending June, 30: July, 15
  • Quarter ending September, 30: October, 15
  • Quarter ending December, 31: January, 15

Our collaborating law firm in India (Little & Co.) is happy to assist, should you need any support with this.

  Argentina: Equity Reporting

July 31, 2018
Affects: Employee

Any Argentinean residents that are holding shares in foreign companies (as a result of share plans) are required to file an electronic report of such holdings in a specific annual filing to the tax authorities. Individuals must report their shareholdings as of 31 December of the previous year (including shares obtained under employee share plans) by July 31 of the following year.

Our collaborating law firm in Argentina (Nicholson y Cano Abogados) is happy to assist, should you need any support with this.

  Israel: Equity reporting

August 9, 2018
Affects: Local company

For stock option, RSU, and ESPP grants under trustee and non-trustee plans in Israel, reports must be made quarterly to the Israeli tax authorities. At the end of each calendar quarter, the local affiliate or trustee, as applicable, must file Form 146 detailing the grants made during that quarter with the Israeli tax authorities.

Please note that while the Israeli tax authorities have indefinitely extended the deadline for these submissions (until an electronic submission system is operable), some companies and trustees choose to make these reports in hard copy until the electronic system is operable.

Our collaborating law firm in Israel (Yair Benjamini Law Offices) is happy to assist, should you need any support with this.

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