This Commentary highlights some of the principal
calendar and year-end reporting requirements for employee stock
plans that U.S. companies most commonly encounter when offering
these programs to their employees in selected jurisdictions
worldwide. Please note that this Commentary does not
address routine, year-end tax reporting obligations. A chart
summarizing these items appears at the end of this
Commentary. If you have any questions about these
requirements or need any assistance, please do not hesitate to
contact one of the Jones Day lawyers listed below.
AUSTRALIA
Employers are subject to annual reporting requirements with
respect to all equity grants to Australian employees. By July 14,
2015, Australian employers must issue an Employee Share Scheme
Statement to each employee who was granted an equity award that
vested in the prior tax year (i.e., before June 30, 2015). By
August 14, 2015, the employer must file an Employee Share Scheme
Annual Report with the Australian Taxation Office
("ATO").
CHINA
Exchange Control Reports for Stock Options/Restricted
Stock Units/Purchase Rights
For companies that have obtained SAFE registration for their
equity plans in China, quarterly reports must be filed with the
local SAFE officials detailing the company's equity plan
activity (e.g., grants, exercises, share sales, and the balance of
the designated foreign exchange account)during the previous
quarter. The next report is due by January 6, 2015 (which is the
third business day of the first quarter of the 2015 calendar year)
for activity that occurred during the fourth quarter of 2014.
In addition, companies that have obtained SAFE approval for their
equity plans (and the plans have not since been terminated) must
renew their foreign exchange quota for the 2015 calendar year. This
renewal request should be made annually by the Chinese affiliate
that is authorized by its parent company outside of China to act as
its local agent with respect to SAFE-related matters and should be
filed by December 31, 2014.
FRANCE
Tax Reporting for French-Qualified Awards
French affiliates of companies that grant stock options and/or
restricted stock units ("RSUs") to their employees in
France that are tax-qualified under the French Commercial Code must
fulfill certain tax reporting requirements to (i) the social
security office ("URSSAF"), (ii) the beneficiary, and
(iii) the French tax authorities. Among other things, equity awards
are generally considered tax-qualified in France if they are
granted pursuant to a special French sub-plan and meet specific
requirements.
At the time of grant of French tax-qualified stock options and/or
RSUs, the French affiliate must report to the URSSAF (i) the name
and address of each beneficiary, and (ii) the number and value of
the options and/or shares granted.
By March 1 of the year following the year in which an employee
exercises his or her French tax-qualified stock option and/or vests
in his or her tax-qualified RSUs, the French affiliate must provide
the employee with an individual statement. With respect to stock
options, the individual statement provides (i) the French
affiliate's corporate purpose, the location of its principal
establishment, and/or the location of its registered office; (ii)
the name and address of each employee; (iii) the exercise price of
the exercised stock options; (iv) the number of shares acquired
upon exercise of the stock options; (v) the date of grant and date
of exercise of the exercised stock options; (vi) the acquisition
gain realized upon exercise; and (vii) the excess amount of the
discount at the time of grant of the exercised stock options, if
the discount granted to the employee exceeds 5 percent of the
average trading price for the 20 trading days preceding the date of
grant. With respect to RSUs, the individual statement generally
requires the same information as listed above for tax-qualified
stock options except that the data should be referenced from the
vesting date for the RSUs.
The French affiliate must also send a copy of this individual
statement to the tax office where it files its corporate tax return
before March 1 of the year following the year in which an employee
exercises the stock option and/or vests in his or her tax-qualified
RSUs.
In addition, French affiliates should report details regarding the
exercise of French-qualified stock options and the vesting of
French-qualified RSUs in the annual employer year-end declaration
("DADS") by February 1 of the year following the year in
which an employee exercises his or her options and/or vests his or
her RSUs. French employers must include in the DADS the same
information as listed above for the individual statement.
Annual Report to Shareholders
If the French affiliate of the issuer company has annual
shareholder meetings, the French affiliate should distribute a
special report to its shareholders at its annual shareholders'
meeting that lists the French-qualified stock option and RSU grants
that have been made to the 10 employees of the French affiliate who
have received the most stock options and/or shares upon
exercise/vesting of the awards, as well as the corporate executives
of the issuer company, its affiliates, and the affiliated companies
of the consolidated group. If the French affiliate does not hold
its own shareholder meetings, the French affiliate should still
compile this report but retain it in its files rather than
distributing it to shareholders.
INDIA
Tax Reporting for Stock Options/Restricted
Stock/Restricted Stock Units/Purchase Rights
Companies are required to withhold on the taxable gains from
equity awards (at exercise for stock options, vesting for
restricted stock and RSUs, and purchase for employee stock purchase
plans). Companies are also required to issue a Tax Deducted at
Source ("TDS") certificate to their employees by May 31,
2015 after the end of the tax year (March 31, 2015). Employees
should use this certificate to file their annual tax return, which
is due on or about July 31, 2015.
In addition, the Indian affiliate is required to file TDS returns
with the Indian tax authorities on a quarterly basis. Those
returns, which are due by the 15th day following the last day of
the relevant quarter, report details on all amounts withheld during
the quarter, including those amounts withheld with respect to
taxable gains. With respect to the sale of shares, employees will
continue to be responsible for paying and reporting any applicable
capital gains tax.
Exchange Control Report
Companies should also be aware of the requirement for the Indian
affiliate to file a statement with the Reserve Bank of India
("RBI") through the AD Category–I Bank, which
provides details regarding the shares issued to or repurchased from
residents of India during the prior fiscal year. This report should
be filed on Form ESOP Reporting (Annex–B (issuance) and
Annex–C (repurchases)) of the RBI Master Circular on Direct
Investment by Resident in Joint Venture (JV) / Wholly Owned
Subsidiary Abroad (dated July 2014)("Master Circular").
The Master Circular does not prescribe the date by which the report
must be filed. Therefore, it is advisable to submit the report as
soon as possible (preferably by June 30, 2015, because the Master
Circular will be replaced on July 1, 2015).
IRELAND
Tax Reporting for Stock Options/Restricted Stock
Units/Purchase Rights
By March 31, 2015, all employers are required to file a Form RSS1
with the Irish Revenue with respect to the following events
occurring in the 2014 tax year: (i) options and other rights
granted; (ii) shares issued following the exercise of options;
(iii) shares issued (other than option exercises); and (iv)
consideration given for options and other rights assigned or
released. Please note that the form must be filed electronically
starting in 2015 (in a form that will be specified by the Irish
Revenue).
Separate reporting requirements apply for save as you earn plans,
approved profit sharing plans, and employee share ownership
trusts.
ISRAEL
Tax Reporting for Stock Options/Restricted Stock
Units/Purchase Rights
For stock option, RSU, and ESPP grants under trustee and
non-trustee plans in Israel, reports must be made both quarterly
and annually 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. In addition, annually, the local
affiliate or trustee must file Form 156 with the Israeli tax
authorities by March 31 of the following year detailing the grant
activity and the status of any outstanding grants during the prior
calendar year.
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.
JAPAN
Tax Reporting for Stock Options/Restricted Stock
Units/Purchase Rights
Japanese companies that are owned 50 percent or more by
non-Japanese companies and Japanese branch offices of non-Japanese
companies are required to file a statement with the district
director of the tax office if an employee of a Japanese branch or
subsidiary of a foreign parent exercised, or received benefits
under, any of the following rights:
- The right to acquire, without payment or with payment of a discounted price, stock of the foreign parent or any of its parent or subsidiaries (collectively, "Parent Stock").
- The right to receive payment of cash in the amount equivalent to the price of the Parent Stock or distributions related to the Parent Stock.
- The right to acquire the Parent Stock or receive payment of cash where the price of the Parent Stock, the business results of the foreign parent, or other index exceeds a predetermined threshold within a certain period.
Exercises of stock options, vesting of RSUs, dividend equivalents,
and ESPP purchases are subject to these new reporting requirements.
These filings must be made with respect to any exercises or
payments by March 31 of the calendar year following the year in
which the exercise or payment occurred.
MALAYSIA
Tax Reporting for Equity Award Vesting
Companies that grant equity awards to employees in Malaysia must
report, on an annual basis, any stock option exercises, RSU
vesting, and/or purchases under an ESPP that took place during the
previous calendar year. The report must be submitted to the
Malaysian Inland Revenue Board in Appendix C of the Form
BT/MSSP/2012 (which is now also known as Appendix A and is the form
used to report the grant of equity awards) and should be filed by
January 31 of each year, in tandem with the preparation of the
statement of remuneration (i.e., EA Form) of the employees. Please
note that if the equity awards are granted to employees of more
than one Malaysian entity, a separate filing should be made by each
Malaysian entity as they are separate and distinct employers.
PHILIPPINES
Securities Reporting for Exemption
Companies that grant equity awards to their employees in the
Philippines typically obtain an exemption from the Securities and
Exchange Commission in the Philippines ("SEC
Philippines") to avoid having to register their securities
with the SEC Philippines. Once an exemption has been received from
the SEC Philippines, the company is then required to file an annual
report with the SEC Philippines by January 10 of each year that
reflects the number of shares that have been issued by the company
pursuant to stock option exercises, the vesting of restricted stock
units, and purchases under an employee stock purchase plan during
the prior calendar year.
SINGAPORE
Certain Tax-Favored Program Applications
Companies that grant stock options and share awards in Singapore
may have awards that are potentially eligible for the Qualified
Employee Equity-Based Remuneration Scheme (the "QEEBR
Scheme") and the Equity Remuneration Incentive Scheme (All
Corporations)(the "ERIS"). Employers that desire to
operate stock plans that qualify for the QEEBR Scheme and the ERIS
Scheme must keep sufficient documentation to show that their stock
plans satisfy the applicable requirements when requested by the
Comptroller of Income Tax.
Qualified Employee Equity-Based Remuneration
Scheme
Under the QEEBR Scheme, qualifying employees may apply to defer
payment of the income tax due at exercise of stock options and
vesting of share awards, including RSUs, for a period of up to five
years, subject to an interest payment.
Under the terms of the QEEBR Scheme, a stock plan that meets the
applicable requirements is automatically qualified, and no formal
approval is required. The QEEBR scheme generally requires that
stock options with an exercise price equal to or greater than the
market value at the time of grant do not vest any earlier than one
year after the date of grant, and for stock options where a
discount at grant applies, the option may not vest any earlier than
two years after the date of grant. For share awards, where the
price paid for the share is equal to or greater than its market
value at grant, the award cannot vest earlier than six months from
the date of grant. However, if the price paid is less than market
value at the time of grant, the award cannot vest any earlier than
the first anniversary of the date of grant.
Employees must submit an application form to defer their tax gains
to the Comptroller of Income Tax, and the employer must certify on
the application form that the stock plan under which the stock
option and/or share award is granted qualifies for the QEEBR Scheme
by meeting the applicable vesting period requirements. The form
must be submitted to the Comptroller of Income Tax by April 15,
2015.
Equity Remuneration Incentive Scheme (All
Corporations)
Under the ERIS, qualifying employees are eligible for income tax
exemptions for gains arising from qualifying stock option and share
award plans, including RSUs, of up to SGD 1 million (approximately
USD 765,292) over a period of 10 years. While the ERIS was phased
out in 2013, it still applies to gains accrued through December 31,
2023. Under this scheme, the employee will enjoy a full tax
exemption on the first SGD 2,000 worth of gains from the stock
option and share awards plan and a tax exemption of 25 percent on
the remaining amount of gains from such plan for each year of
assessment during the 10-year period. Under the terms of the ERIS,
among other requirements, the same vesting requirements applicable
to the QEEBR Scheme also apply to stock options and share awards,
respectively. In addition, the stock options and share awards must
be offered to a designated percentage or more of a company's
eligible employees in Singapore (subject to certain exclusions for
part-time, newly hired, and short-term employees).
The local affiliate is required to provide employees with the
details of all gains arising from stock plans, segregating the
gains, where applicable, into those qualifying for the various
share incentive schemes and those that do not qualify for any tax
exemption under any schemes, no later than March 1, 2015 on an
annual return. The annual return to employees is made on Form IR8A.
If the company submits salary data electronically to the
Comptroller of Income Tax, it may provide employees with such
details of the remuneration in any alternative format.
Whenever the local affiliate grants options or shares under the
ERIS, it is also required to provide a written confirmation to a
qualifying employee, within the four-week period following December
31 of the year of grant, that the qualifying terms and conditions
of the ERIS have been met in respect of those share awards and/or
stock options granted under the relevant qualifying stock
plan.
THAILAND
Securities Reporting for Stock Options/Purchase
Rights
Companies that grant stock options to the employees of their Thai
affiliates must report any exercises of those options to the Thai
SEC within 15 days after the end of the calendar year in which the
options were exercised in accordance with the details described in
guidance set forth by the Thai SEC, as well as submit a summary of
the plan pursuant to which the options were granted. Therefore,
with respect to stock options exercised in 2014, the issuer company
must file the report by January 15, 2015. A similar requirement
exists for stock purchased under an ESPP—a report has to be
filed within 15 days after the end of each purchase period under
the plan. For example, if an ESPP's annual purchase period ends
on January 31 of each year, the reporting deadline would be
February 15 of that same year.
UNITED KINGDOM
Tax Reporting for Incentive Stock Options/Purchase
Rights
For each tax year, which runs from April 6 to April 5 in the UK,
UK employers are required to file a number of tax returns with Her
Majesty's Revenue & Customs ("HMRC") that relate
to equity grants made to their employees and the exercise or
vesting of such rights. These returns must be filed online.
With the introduction of real-time information ("RTI")
reporting, employers are now required to send to HMRC through the
PAYE (the payroll tax deduction system) online details of every
payment made to an employee "on or before" the date the
payment is made. RTI reporting is required for taxable amounts that
are withheld through payroll on stock options exercises and vesting
of other stock awards. HMRC has confirmed that RTI reporting must
be applied to international mobile employees that have UK tax and
national insurance contribution liability, even if paid by an
overseas employer.
By July 6, 2015, UK employers must also file online, through the
PAYE online service, annual stock-related benefits reports with
respect to stock options and other stock purchase rights that have
been granted and/or exercised and/or vested in the 2014–2015
tax year. With respect to stock options/purchase rights granted
under non-tax-advantaged stock plans, the report must be filed on
Form 42. With respect to rights granted under tax-advantaged stock
plans, UK employers must complete the prescribed form for that
particular type of approved plan (Form 34, 35, 39, or 40).
UNITED STATES
Tax Reporting for Incentive Stock Options/Purchase
Rights
U.S. companies that grant incentive stock options
("ISOs") to their U.S. employees or sponsor an ESPP in
which their U.S. employees participate must deliver an information
statement (at least once per year) to those employees who have
exercised their ISOs during that year or who have purchased shares
of stock under an ESPP. For stock purchases that occurred in 2014,
information statements must be delivered to employees by January
31, 2015 and then filed with the IRS by either February 28, 2015 or
March 31, 2015, depending on the filing format. If paper returns
are filed with the IRS, the filing deadline is February 28, 2015,
whereas electronically filed returns, which are required for 250 or
more returns, are due by March 31, 2015.The information statement
must provide the number of shares purchased, the exercise or
purchase price, and the value of the shares transferred from the
company to the participant, among other items. The information
statement for exercised ISOs should be made on IRS Form 3921 and on
Form 3922 for shares purchased under an ESPP.
VIETNAM
Exchange Control Reporting for Approved
Issuers
Companies outside of Vietnam require exchange control approval
from the State Bank of Vietnam with respect to the offer of awards
under an equity plan to employees in Vietnam. If a company has
received such approval, it is required to submit an annual report
to the State Bank of Vietnam that summarizes the number of grants
made during the prior year as well as the number of shares issued
pursuant to awards in the prior year. Reports used to be due by
January 31 of each year, but the State Bank of Vietnam has recently
granted approvals that expressly provide March 31 as the reporting
deadline and has advised that all companies subject to the
reporting requirement may file by March 31. Therefore, reports for
the 2014 calendar year are now due by March 31, 2015.
This Commentary should be considered guidance only and
should not be relied upon as legal advice. Specific design features
of employee stock plans can substantially alter the applicable
legal requirements. Readers are urged to obtain specific legal
advice regarding how the local requirements apply to their plan
terms before filing any year-end report.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.