Global Tax and Regulatory Update: September 2018

Country updates

 New exemption thresholds under the EU Prospectus Regulation as of July 21, 2018

The new EU Prospectus Regulation (EUPR) came into force on July 20, 2018 and will apply fully as of July 21, 2019. The Regulation replaces the EU Prospectus Directive (EUPD) and contains new prospectus exemptions for offers made under employee share plans from 2019.  However, changes to existing exemptions are already in force and affected companies will need to review these carefully in advance of the new employee share plans exemption taking effect.

What is changing?

The EUPD is being replaced by the new Regulation. Under the EUPD, there is an Employee Share Plan Exemption available for companies who are headquartered in the EU, or whose shares are listed in the EU.

The Regulation will extend the Employee Share Plan Exemption, such that all companies (regardless of where they are headquartered, and where their shares are listed) will qualify for the exemption. This will take effect from July 21, 2019.

To rely on the new Employee Share Plan Exemption, companies will continue to be required to provide certain information regarding the reasons for and details of the offer, and the number and nature of the securities offered.

What happens prior to July 21, 2019?

The Regulation is currently in a transitional phase and will not be fully implemented until July 21, 2019. In the meantime, companies headquartered and/or listed in the EU can continue to rely on the Employee Share Plan Exemption under the EUPD.

Companies outside the EU must either rely on a different exemption (where one is available), or publish a prospectus in connection with the offer.

Some non-EU companies may previously have relied on the De-Minimis Exemption which was available in respect of offers not exceeding a value of EUR 5 million in 12 months. This has been amended under the Regulation with effect from July 21, 2018, and has been reduced to EUR 1 million in 12 months. However, individual EU member states have the ability to choose to increase this amount, up to EUR 8 million in 12 months.

The Regulation also contains an exemption (similar to the one under the EUPD) for offers made to fewer than 150 people per EU member state.
While some countries have already adjusted their exemption threshold and opted for EUR 8 million e.g. United Kingdom, France, Germany, and Denmark, other Member States are still in the process of obtaining approval such as Slovenia and Italy.

Many Member States have applied for the same threshold as before such as Croatia, Ireland, Hungary, Malta, The Netherlands, Portugal, and Spain at EUR 5 million, whereas Sweden and Finland have opted to maintain their EUR 2.5 million threshold. Austria has increased its threshold to EUR 2 million. Some countries have not yet moved to change the EUR 1 million prospectus exemption thresholds including Bulgaria, Cyprus, Czech Republic, Greece, Latvia, and Luxembourg.
Changes could take a while to be official as the European Securities and Markets Authority (ESMA) has not set any deadline to present consultations for a threshold increase.

What action is required?

Companies should consider the new exemptions available under the Regulation, and the application of the exemptions in the individual EU member states, prior to making offers under employee share plans. In particular companies relying on, or seeking to rely on, the De-Minimis Exemption must check the relevant thresholds and any additional conditions or requirements, which apply in each member state in which they are operating.

Shareworks Global Compliance Comment
We recommend that non-EU listed companies or companies headquartered outside the EU review exemptions available prior to making any offers. Please contact us for further assistance if required.

 Ghana: Amendments to personal income tax rates for Ghana

Effective August 1, 2018 Ghana introduced an extra personal income tax band.
The personal income tax now has a sixth tax band for income levels above GHS 120,000 which will be taxed at 35 per cent. The tax rates and bands will now be as follows:

Bands in Ghanaian cedi (GHS)      Rates
0 – 3132.99                                        0 %
3133 – 3971.99                                  5 %
3972 – 5171.99                                 10 %
5172 – 38,891.99                              17.50 %
38,892 – 119,999.99                         25 %
120,000 and above                           35 %

 

 United Kingdom: EU Prospectus Regulation (EUPR) threshold increased to EUR 8 million

As of July 21, 2018 United Kingdom has increased the threshold to EUR 8 million for offers over a 12 month period.

UK position following Brexit

It is currently expected that the UK will formally leave the EU on March 29, 2019. This is before the Regulation’s full implementation date of July 21, 2019. As such, it is possible that offers made in the EU by a company that is headquartered or listed in the UK, will cease to qualify for the current Employee Share Plan Exemption under the EUPD (for EU listed and headquartered companies) and may therefore need to either rely on a separate exemption, or if none are available, publish a prospectus. However, this position will need to be reviewed as final arrangements, and in particular the impact of any transitional provisions, in relation to Brexit become clearer.

 United Kingdom: SAYE changes become effective September 2018

We previously informed about changes to Sharesave plans where participants will be able to take a longer “payment holiday”. Effective 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:

  • 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

 Vietnam: Application process for the State Bank of Vietnam’s approval

Last month we reported on how a share plan can operate in Vietnam if foreign exchange is not used to purchase shares. One method is the use of “phantom shares” and the other one is through local payment for offshore shares in local currency. For the second method, payment in local currency, there is no regulatory limit on the deduction level of the employee’s salary where the employee pays for the shares. If the employee agrees to a deduction from his salary, the employee’s consent to salary deductions must be obtained by a specific method, eg. in writing or by recording electronically on the online acceptance platform.

This month’s article from our series on Vietnam will discuss how to apply for the approval of the State Bank of Vietnam (SBVN) and what documentation needs to be provided.

In order to apply for the SBVN’s approval, the local employer must prepare an application with an application letter, the share plan rules or a description of the rules, an extract of board meetings of the parent company related to implementation of the share plan for its employees, including its employees in Vietnam, and a copy of the Investment Certificate or the Certificate of Business Registration of the local company. The application letter needs also to explain in detail the reason why the overseas parent company wants to implement the share plan in Vietnam, the criteria to determine eligible employees, the number of employees to whom awards will be granted, their nationalities, the obligations of the eligible employees after the shares have been acquired by employees, etc. The application letter should be signed by the legal representative of the local company. All documents must be translated into Vietnamese.

According to Circular 10, the following documents must be submitted to the SBVN by the local employer:

  • Application for registration to implement the SOP
  • Legalised copy of the incorporation certificate of the offshore entity
  • Notarised copy of the Investment Certificate/Investment Registration Certificate/Management Office Registration Certificate/Branch License/Representative Office License (as the case may be) of the local employer
  • Documents to describe the plan, including the objectives, conditions, time, payment method, value of awarded shares, remittance of amounts abroad, receipt of dividends, and the foreign currency account to be opened and maintained by the local employer in a licensed bank in Vietnam to facilitate the remittance of payments for the plan, and
  • List of participating employees who are Vietnamese

The SBVN will respond to the application within 15 working days from the date of receipt of a complete dossier. In practice, however, it may take more than 30 working days to obtain the approval of the SBVN because they may request more documents or adjustments to the submitted documents, either from the local employer or the offshore entity. The approval process can become a rather lengthy process. There is no government fee in respect of the SBVN’s approval.

Following the approval, the local employer must make an annual report to the SBVN on implementation of the share plan including a list of the participating employees, the inbound and outbound remitted funds, the amount of awarded shares, etc. Additionally, the local employer must file a more frequent quarterly report on implementation of the share plan with the SBVN. It must be done no later than the 20th day of the first month of the following quarter.

We would like to invite you to read next month’s edition of our newsletter, which will discuss the special circumstances of an expatriate participant purchasing offshore shares and whether the State Bank’s approval is required or not.

 

Upcoming filing and reporting deadlines

 India: Annual report

September 30, 2018
Affects: Local Company

Indian employers must file an annual report with the Reserve Bank of India which provides details regarding the shares issued to residents of India, the number of employees who received the shares and the amount of funds remitted for the purchase of shares during the previous tax year on a specified form. Although the report must be filed within a reasonable time following the end of the financial year, companies are advised to file the report by September 30.

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

 Italy: Foreign asset reporting

October 1, 2018
Affects: Employee

Italian resident taxpayers who are either the legal owner or beneficial owner of financial assets held abroad, including shares in foreign companies, have to report such assets on Schedule RW of their income tax return, which is due by 30 September following the end of the calendar year.

Our collaborating law firm in Italy (Gianni, Origoni, Grippo, Capelli & Partners) is happy to assist, should you need any support with this.

 China: SAFE quarterly reports

October 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.

 India: Indian employer tax filings

October 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: 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.

 Israel: Equity reporting

November 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 in the meantime.

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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