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Global Tax and Regulatory Update: May 2019


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COUNTRY UPDATES

Australia: Proposed Changes to Employee Share Scheme’s Regulatory Framework

The Australian Government has recently released a consultation paper on proposals to simplify the Employee Share Scheme (ESS) regulatory framework. The main proposals include:

  • increasing the current private company limit on the value of offers in any 12-month period from AUD 5,000 to AUD 10,000;
  • allowing offers of contribution plans such as an employee share purchase plan within the scope of the exemption; and
  • allowing small companies to offer employee share plans without the requirement to disclose commercially sensitive financial information.

We continue to monitor these developments.

Shareworks Global Compliance comment

We recommend companies and share plan administrators stay alert for further news. Please contact us for more information.

 

India: Data Privacy Law Change Proposal

A draft data protection bill was released in India on July 27, 2018. The bill appears to be modelled after the EU General Data Protection Regulation (GDPR), and includes the following proposed provisions:

  • enhancing notice and consent requirements;
  • establishing a dedicated Data Protection Authority;
  • implementing conditions and restrictions for cross-border transfers of personal data;
  • imposing a duty to report harmful data privacy breaches;
  • establishing penalties for violations with fines of up to INR 150 million or 4% of total worldwide turnover in the previous financial year (whichever is greater), and criminal penalties of up to 5 years imprisonment for certain offences.

While it is not yet clear when this proposal will be approved or what impact it will have on equity awards offered by a foreign company to employees in India, companies operating equity plans need to be prepared to conform their current data process policy to the new law.

Our Global Compliance Network Law Firm, Little & Co., in India would be happy to provide you with more information. For any further information feel free to reach out to Rajni Divkar at rajni.divkar@littlecompany.com

Shareworks Global Compliance comment

We recommend companies and share plan administrators stay alert for further news. Please contact us for more information.

 

Luxembourg: Option for Non-Resident Individual Taxpayers to Be Taxed as Resident Taxpayers

March 21, 2019, was marked by the publishing of a tax circular on the option of non-resident taxpayers to have a similar tax treatment as resident taxpayers in Luxembourg.

Non-resident taxpayers earning a taxable income in Luxembourg can request to be treated as resident tax payers and thus benefit from the advantages of the tax treatment for resident taxpayers.

To be eligible for such option, the following conditions must be met:

  • income earned in Luxembourg must represent more than 90% of their worldwide income. The calculation of this threshold could include each of the partner’s or spouse’s individual situation; and
  • as from the fiscal year 2018, non-resident tax payers whose total net income not taxable in Luxembourg is less than EUR 13,000 can also apply to be treated as resident taxpayers, even if the taxable income in Luxembourg represent more than 90% of the worldwide income.

For those opting to be considered as a resident taxpayer in Luxembourg, there is an obligation to declare all the worldwide income i.e. both the domestic and the foreign sourced income.

While foreign income is generally omitted in the tax base in Luxembourg subject to tax treaties, it is however included to the taxable income for the determination of the exempted tax rates.

Shareworks Global Compliance comment

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

 

Nicaragua: Changes to Capital Gains and Dividend Taxation

The tax authority (“Dirección General de Ingresos”) issued a notice on March 1, 2019, providing for amended withholding rates. Some of the key amendments are as follows:

  • withholding at a rate of 15% will be applied on dividends, interest, royalties and commissions derived by residents and non-residents;
  • gains derived by non-residents on the sale of shares will also be taxed at 15%.

The new legislation entered into force on February 28, 2019.

Our Global Compliance Network Law Firm, Consortium Legal, in Nicaragua would be happy to provide you with more information. For any further information feel free to reach out to Carlos Taboada at ctaboada@consortiumlegal.com and Karla Sandino at ksandino@consortiumlegal.com

Shareworks Global Compliance comment

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

Peru: Change in Personal Income Tax Bands

Effective April 30, 2019, income tax on labour income and foreign income generated by domiciled individuals will be determined by applying the following progressive rates:

 

2019 Fiscal Year
Sum of Net Peruvian Source Income and Foreign-Source Income Rate (%)
Up to 5 Tax Units 8
More than 5 up to 20 Tax Units 14
More than 20 up to 35 Tax Units 17
More than 35 up to 45 Tax Units 20
More than 45 Tax Units 30

 

Peru uses the “Tax Unit”, a figure set annually by the Peruvian Tax Administration, to determine applicable rates and deductions for tax purposes. For the 2019 fiscal year, a Tax Unit is equivalent to PEN 4,200. Accordingly, the new income tax bands for domiciled individuals will be:

 

2019 Fiscal Year
Bands (PEN) Rate (%)
0 – 21,000 8
21,000.01 – 84,000 14
84,000.01 – 147,000 17
147,000.01 – 189,000 20
189,000.01 – 30

Our Global Compliance Network Law Firm, Philippi Prietocarrizosa Ferrero DU & Uría, in Peru would be happy to provide you with more information. For any further information feel free to reach out to Dante Sanguinetti at dante.sanguinetti@ppulegal.com

Shareworks Global Compliance comment

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

Poland: New Rules on Employee Records Retention

Effective January 1, 2019, major changes have been implemented concerning employee records retention obligations by employers, as outlined below:

  1. employers can elect to store employee documentation in paper form or electronically (previously, only hard copies were permissible);
  2. subject to certain exceptions, employers will in most cases be required to keep records for a period of 10 years only, representing a significant reduction from the previous 50-year records retention requirement;
  3. following termination or expiration of the employment relationship, an employer must inform the employee of:
    • the length of time the employee records will be kept;
    • the option for the employee to collect his or her records by the end of the calendar month following an expiration of the document retention period;
    • the destruction of employee records following the expiration of the above-noted period.
  1. within 12 months following the end of the above-noted collection period, an employer’s obligation is to permanently destroy the employee records.

Legal sanctions 

An employer can be liable to a fine ranging from PLN 1,000 to PLN 30,000 following a failure to:

  1. store the employee documentation within the period specified;
  2. keep the employee documentation in a manner to prevent its damage or destruction.

Notwithstanding the above, breaches of the personal data protection may result in a fine imposed based on the General Data Protection Regulation (GDPR).

Our Global Compliance Network Law Firm, KKS Legal, in Poland would be happy to provide you with more information. For any further information feel free to reach out to Małgorzata Wysocka at m.wysocka@kkslegal.pl

Shareworks Global Compliance comment

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

Serbia: Employment Share Schemes Door Opened

Securities Regulation

In the absence of clear regulation, the Serbian Securities Commission (“SSC”) has sought to enable the offering of employee share plans in Serbia by foreign companies. In March 2019, the SSC opined that when the initiative to participate in an employee share plan is undertaken by the employee, then Serbian securities regulation should not be triggered and the offer can be considered a “private offer”. This position assumes that such offers will be deemed to be made outside of Serbia.

To rely on this regulatory position, it is recommended that companies undertake certain actions to document an employee’s initiative. For instance, the employees interested in participating in an employee share plan could be required to send an email to the Serbian subsidiary to this effect. After collecting the requests of all interested employees, the local company can send the information to the parent company on behalf of all interested employees. Upon review, the parent company can determine if the interested employees are eligible and proceed accordingly. All plan-related correspondence should be saved for recordkeeping.

Foreign Exchange Regulation

Depending on the type of equity program, Serbian foreign exchange regulation may have to be considered. Although Serbian residents are permitted to make payments for the purchase of foreign shares, stricter rules apply to cross-border transactions with financial derivatives. Specifically, residents may perform financial derivative transactions on OTC markets only for hedging purposes and only in respect of certain risks (including the price fluctuation risk for securities). Although equity awards are usually non-tradeable (to not trigger the foreign exchange regulations), each equity program should be assessed to ensure compliance with the applicable legislation.

Our Global Compliance Network Law Firm, Karanović & Partners o.a.d., in Serbia would be happy to provide you with more information. For any further information feel free to reach out to Maja Jovančević Šetka atmaja.jovancevic@karanovicpartners.com and Marija Vićić at marija.vicic@karanovicpartners.com

Shareworks Global Compliance comment

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

UPCOMING FILING AND REPORTING

India: Tax Deducted at Source (TDS) certificate

May 31, 2019
Affects: Local Company

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

 

Portugal: Equity Reporting

June 30, 2019
Affects: Local Company

Employers in Portugal must submit Form Modelo 19 with details of the creation and application of all share plans set up for the benefit of its employees by 30 June following the tax year.

 

Our collaborating law firm in Portugal (Abreu & Marques Associados) is happy to assist, should you need any support with this.

 

Saudi Arabia: Quarterly Equity Reporting

July 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.

 

Australia: Employee Share Scheme Statement

July 14, 2019
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 must 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 must 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, 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.

 

UPCOMING EVENTS

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. This 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: share.works/synergy

This email is part of our updating service. If you have any queries on any of the updates or you no longer wish to receive these emails at all you can change the settings here, or contact Solium Global Compliance at gc_communications@solium.com.

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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