Global Tax and Regulatory Update: April 2019


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COUNTRY UPDATES

 Brazil: Proposal for Changes to Social Security Rates

On February 20, 2019, the Brazilian government proposed changes to the social security contribution rates for both private and public sector employees, as noted below.

If this proposal is approved by the Brazilian National Congress, the social security contribution for private sector employees and public servants will be as follows:

Private Sector Employees Public Servants
Salary (BRL) Rate (%) Salary (BRL) Rate (%)
0 – 998 7.5 0 – 998 7.5
998.01 – 2,000 9 998.01 – 2,000 9
2,000.01 – 3,000 12 2,000.01 – 3,000 12
3,000.01 – 5,839.45 14 3,000.01 – 5,839.45 14
5,839.46 – 10,000 14.5 5,839.46 – 10,000 14.5
10,000.01 – 20,000 16.5 10,000.01 – 20,000 16.5
20,000.01 – 39,000 19 20,000 – 39,000 19
39,000.01 – 22 39,000.01 – 22

The progressive rate structure for both the public and private sector will provide a more progressive tax structure, and will assist in  reducing the public social security deficit.

We are continuing monitoring this proposal and will keep you informed about possible future changes.

Our Global Compliance Network Law Firm, Pinheiro Neto Advocados, in Brazil would be happy to provide you with more information. For any further information feel free to reach out to Cristiane I. Matsumoto atcmatsumoto@pn.com.br and Lucas Barbosa Oliveira at loliveira@pn.com.br

Shareworks Global Compliance comment

We recommend companies and share plan administrators stay alert for further news.

 

 Canada: Federal Budget Proposal – Stock Options

Proposed Changes to Canada’s Taxation of Stock Options

Current Rules for Stock Option Taxation

Stock options have long enjoyed favourable tax treatment under the Canadian federal tax system. Specifically, 50% of the gain from the exercise of stock options is 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. Note that taxation of stock options issued by Canadian controlled private companies is further deferred until the time of sale. In 2016, the Liberal government had proposed to eliminate this tax benefit for all but the first CAD 100,000 worth of value. The proposal was scrapped after backlash from the business community.

2019 Budget Proposal for Restricting Preferential Tax Treatment of Stock Options

Now, the Liberal budget delivered on March 19, 2019, includes a modified proposal to eliminate this tax benefit on any stock options gains in excess of a CAD 200,000 annual cap for option grants made by “large, long-established, mature firms”. The number of options subject to the CAD 200,000 cap would be calculated based on the fair market value of the underlying shares at the time of grant. One beneficial aspect of the proposed tax changes is that companies would be able to take a corporate tax deduction for the value of the options gains that are not subject to preferential tax treatment.

However, under the current budget proposal, employees of “start-ups and rapidly growing” Canadian business will continue to enjoy the same tax benefits as before (that is, the CAD 200,000 cap will not apply). Companies will have to wait until the summer of 2019 for specifics regarding which types of companies can continue to qualify for the unrestricted preferential tax treatment. As a public policy matter, the Liberal government noted that the bulk of the tax benefits are currently enjoyed by high income earners, resulting in a regressive tax system for stock options. The government is claiming that the new stock option tax treatment is intended to align the taxation of options with that in the United States and that the changes are not expected to affect the vast majority of Canadian employees who currently have or will receive stock options in the future.

Although the government is intending to curb what it sees as an unwarranted tax break for high income earners, it has confirmed that it wants to continue offering preferential tax treatment for early stage and growing companies to support younger and growing Canadian businesses who have limited resources to attract talent, and to support Canada’s competitiveness in the global marketplace.

Actions Steps to Consider Following the Budget Proposal

Since any changes in the tax rules will take effect only for those options granted after the effective date of the new legislation, companies that are likely to fall into the category of “large, long-established, mature firms” may wish to consider making any planned option grants before the summer of 2019 in order to preserve the full preferential tax treatment for its option holders, provided that the tax and compensation benefits to employees and executives outweigh the loss of the corporate tax deduction. Additionally, such companies may wish to consider reviewing their equity compensation strategies overall, given that the unrestricted tax benefit for stock options will no longer be available. Other types of equity awards such as restricted stock units or performance shares may become more attractive in circumstances where the 50% deduction on stock option gains will no longer be available.

Our Global Compliance Network Law Firm in Canada, Stikeman Elliott, will be happy to provide you with more information. For any enquiries, please feel free to reach out to Michel Legendre atmlegendre@stikeman.com

Shareworks Global Compliance comment

We recommend companies and share plan administrators monitor this development. Please contact us for further assistance.


 France: Foreign Companies Registration for French Income Withholding

As previously reported, the new payroll income tax withholding requirement for French employers came into force January 1, 2019. As part of the changes in the law, foreign-based entities employing French tax residents directly (rather than through a French subsidiary) will be required to register with the French tax authorities for the withholding of French income tax. Following registration, the foreign based entity will be advised of the applicable withholding rate by the French tax authorities.

The new payroll withholding requirement is not applicable to French tax-qualified equity awards.

Our Global Compliance Network Law Firm, STC Partners, in France would be happy to provide you with more information. For any further information feel free to reach out to Etienne Pujol at epu@stcpartners.fr

Shareworks Global Compliance comment

We recommend companies review new procedure. Please contact us if you need further assistance.

 Greece: Decrease in Dividends Tax Rate

On March 14, 2019, an amendment to the Income Tax Code was passed by the Greek Parliament. Effective January 1, 2019, the rates of personal income tax on dividends and withholding tax on dividends have been reduced from 15% to 10%.

Our Global Compliance Network Law Firm, KG Law Firm, in Greece would be happy to provide you with more information. For any further information feel free to reach out to Loukas Panetsos at l.panetsos@kglawfirm.gr

Shareworks Global Compliance comment

We recommend companies review and adjust accordingly. Please contact us if you need further assistance.

 Isle of Man: Budget Approved for Fiscal Year 2019-20

The Budget for 2019-20 was approved on March 19, 2019, and will become effective on April 6, 2019. Please find below the summarised details of the Budget.

The income tax bands will not change compared to previous fiscal year. The bands and rates will remain as follows:

Income Tax Bands (GBP Rate (%)
0 – 6,500 10
6,500.01 – 20

The weekly base for calculating National Insurance (NI) contributions for the employees will be as follows:

2019 – 2020 2018 – 2019
Weekly Salary Base (GBP) Rate (%) Weekly Salary Base (GBP) Rate (%)
0 – 125 0 0 – 118 0
125.01 – 784 11 118.01 – 784 11
784.01 – 1 784.01 – 1

As for the employer, the weekly base for NI calculations will increase as follows:

2019 – 2020 2018 – 2019
Weekly Salary Base (GBP) Rate (%) Weekly Salary Base (GBP) Rate (%)
0 – 125 0 0 – 118 0
125.01 – 12.8 118.01 – 12.8

Shareworks Global Compliance comment

We recommend companies review and adjust accordingly. Please contact us if you need further assistance.

 

 New Zealand: “Payday” Reporting from April 1, 2019

Employers are currently required to report their employees’ income information via the Employer Monthly Schedules (“EMS”). From April 1, 2019, the existing EMS (IR348) reporting will be substituted by “payday” reporting. The ir-File used to file EMS and Employer Deductions forms, will be discontinued. This aims to make payroll and “pay as you earn” reporting part of the employers’ payday schedule.

The payday reporting system will require employers to report certain Employment Information Income (“EII”), including (but not limited to):

  • Name of the employee
  • Tax identification number
  • Payment code ESS (“Employment Share Schemes”)
  • Income details (including the equity award taxable amount)
  • Total amount of tax withheld (if any)

For local employers filing the EII electronically (or directly using their payroll software), the EII will generally be due within two working days after the payday. The deadline for such reporting for equity awards will be linked to the taxable event (the “share scheme taxing date”). EII relating to equity awards will generally be reported either:

  • on a payday basis, treating the date that is the 20th working day after the share scheme taxing date as the payday; or
  • twice monthly, treating the 15th of the month as the payday if the 20th working day after the share scheme taxing falls between the 1st and 15th of a month; or treating the last day of the month as the payday if the 20th working day after the share scheme taxing falls between the 16th and the end of a month.

Our Global Compliance Network Law Firm, MinterEllisonRuddWatts, in New Zealand would be happy to provide you with more information. For any further information feel free to reach out to Elizabeth Rowe atelizabeth.rowe@minterellison.co.nz and Charlotte Agnew-Harington at charlotte.agnew-harington@minterellison.co.nz

Shareworks Global Compliance comment

We recommend companies review new reporting requirements. Please contact us if you need assistance.


 Singapore: Proposal to Eliminate Ministry of Manpower Approval to Collect ESPP Contributions

The Singapore government recently approved amendments to the Singapore Employment Act (the “Act”), with effect from April 1, 2019, that will impact employee share plans by eliminating the requirement to seek consent from the Ministry of Manpower (“MOM”) to make payroll deductions for purposes of enabling employees to participate in employee share purchase programs.

Under the revised law, the coverage of the Act has been expanded to all employees, regardless of salary or position. As a result, the prior exemption from coverage for managers and executives earning more than SGD 4,500 monthly has been eliminated. Concurrently, the Act also eliminates the need to seek MOM approval to implement payroll deduction arrangements so long as the company:

  • obtains written consent from employees to make payroll deductions
  • permits employees to withdraw at any time by giving notice to the employer
  • does not penalize employees for exercising their right of withdrawal

Employers should ensure existing contracts or other arrangements with its employees are compliant with the revised law, and that these requirements are appropriately communicated to their workforces in Singapore.

Shareworks Global Compliance comment

We recommend companies and share plan administrators review this change and adjust accordingly. Pleasecontact us if you need further assistance.


 Ukraine: Adoption of New Exchange Controls

The measures of the Law on Currency and Currency Transactions became effective on February 7, 2019. Among other things, the new rules have eliminated the requirement for individuals to apply for a license to make investment abroad (e.g. purchase foreign shares).

The individual licensing regime has been replaced by a system of “e-limits”. Individual residents will now be allowed to purchase and transfer foreign currency abroad for making investments, performing obligations under life insurance contracts, or crediting one’s offshore account in cumulative amount of up to EUR 50,000 per year.

The new rules brought other measures to liberalise the foreign exchange market in Ukraine with an objective to ease the free flow of capital and attract foreign investment.

Our Global Compliance Network Law Firm in Ukraine, CMS, will be happy to provide you with more information. For further information, feel free to reach out to Viktoriia Stavchuk at viktoriia.stavchuk@cms-cmno.com

 

Shareworks Global Compliance comment

We recommend companies and share plan administrators review and amend accordingly. Please contact us if you need further assistance.

 United Kingdom: Changes to Income and Social Security Bands for 2019

The new income tax rates for England and Northern Ireland effective April 6, 2019, are as follows:

Year Income Bands (GBP) Rates (%)
0 – 12,500 0
12,500.01 – 37,500 20
37,500.01 – 150,000 40
150,000.01 – 45

 

The Scottish income tax rates effective April 6, 2019, are as follows:

Year Income Bands (GBP) Rates (%)
0 – 12,500 0
12,500.01 – 14,549 19
14,549.01 – 24,944 20
24,944.01 – 43,430 21
43,430.01 – 150,000 41
150,000.01 – 46

The new employee social security bands effective April 6, 2019, are as follows:

Week Bands (GBP) Rates (%)
0 – 166 0
166.01 – 962 12
962.01 – 2

The threshold for the first band will increase from GBP 162 to GBP 166 and the upper secondary threshold from GBP 892 to GBP 962. The rates remained unchanged.

Our Global Compliance Network Law Firm, Pinsent Masons, in the United Kingdom would be happy to provide you with more information. For any further information feel free to reach out to Fleur Benns atfleur.benns@pinsentmasons.com

Shareworks Global Compliance comment

We recommend companies review and adjust accordingly. Please contact us if you need further assistance.

 

UPCOMING FILING AND REPORTING

 Ireland: Equity Reporting

March 31, 2019
Affects: Local Company

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

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

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

 

Our collaborating law firm in Ireland (McCann FitzGerald, Solicitors) is happy to assist, should you need any support with this.

 

 Japan: Equity Reporting

March 31, 2019
Affects: Local Company

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

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

 

Our collaborating law firm in Japan (Anderson Mori & Tomotsune) is happy to assist, should you need any support with this.

 

 Saudi Arabia: Quarterly Equity Reporting

April 10, 2019
Affects: Solium – Sales

Companies offering share plans to employees in Saudi Arabia under the new securities laws exemption must notify the Capital Market Authority (“CMA”)  within 10 days after the end of the quarter following grant disclosing the total number and value of such offers. This notification can be made by an authorised person or by the company. The company should also review any plan amendments or changes to determine whether any additional filings with the CMA are required.

 

 India: Indian Employer Tax Filings

April 15, 2019
Affects: Local Company

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

The quarterly returns must be submitted by:

  • Quarter ending March 31: May 31
  • Quarter ending June 30: July 31
  • Quarter ending September 30: October 31
  • Quarter ending December 31: January 31

 

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

 

 India: Tax Deducted at Source (TDS) certificate

May 31, 2019
Affects: Local Company

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

In addition, Form 12BA must also be issued to employees by April 30 of the assessment year.

 

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

 

UPCOMING EVENTS

GEO’s 20th Annual Conference – Amsterdam

April 10-12, 2019

GEO’s 20th Annual Conference is specifically designed with a focus on the hottest issues in global share plans and executive compensation and boasts a world-class keynote line-up and more than 50 unique breakout sessions delivered by international experts. The 2019 event features a tailored agenda that addresses specific concerns and issues directly affecting GEO’s members, focusing in the areas of long–term incentives, share plan design, accounting, tax, legal, regulatory compliance, plan communications and administration.

The Solium Team will be there!

June Davenport and Darren Smith will be attending this event. Do look out for them.

 

More info: https://www.globalequity.org/geo/Amsterdam2019

Synergy 2019

May 21-24, 2019

Mark your calendars for Synergy 2019, which will take place on May 21-24, 2019 in sunny Scottsdale, Arizona. Next year will mark the 10th anniversary of the conference and will raise the bar above any other year with lots of new learning opportunities, more chances to network and even more fun! Join us at the breath-taking Hyatt Regency Scottsdale for an equity compensation event like no other.

The Solium Team will be there!

We will be presenting:

 

More info: https://solium.com/synergy/

 

Please note, this is a general guide only and we accept no liability for any loss caused by acting upon or refraining from acting upon the advice contained in this email. While we take every care to ensure the accuracy of the information, there may still have been minor changes in these countries (to the tax rates etc.) or changes that we are unaware of at Solium Global Compliance. There may also have been changes before the date of the Solium Global Compliance update or changes which affect your plans due to the specific nature of your share plans. We would recommend that you consult local lawyers before acting on any of the information above.

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