Staying ahead of the curve on regulatory compliance is a never-ending task for companies. With global legal and tax requirements ever-changing, it is increasingly difficult to avoid a misstep in every jurisdiction.
To help you keep on top of recent developments, here is our quarterly Worldwide Wrap-Up, with some of the most recent changes that should be on your radar.
Australia
The Australian Government is currently considering reforms to the securities laws exemptions for unlisted companies. The proposed reforms include increasing the award cap from AUD5,000 to AUD10,000 per employee and allowing employees to participate in share purchase plans.
Tapestry comment
At present unlisted companies face several challenges when trying to operate share plans in Australia. With fewer restrictions, these reforms would noticeably improve the environment for unlisted companies. The outcome of this consultation is expected towards the end of 2019.
Canada
The Canadian Government is considering limiting existing tax relief for employees of ‘large, long established, mature firms’ who exercise options under an employee share plan. The proposal is a cap on the deduction available to CAD200,000 based on the value of the shares at the grant date. Further details will be released in summer 2019 and the actual change in the law may not come into effect for some time after that. Guidance is expected on exactly what type of companies will be in scope (as the aim is to not change the relief for employees of start-ups/fast growing companies).
Tapestry comment
This proposal may make options less attractive in Canada - especially to those employees with substantial awards that exceed the cap. Canada is one of many countries that wants to ensure it is an attractive place for people to start and grow a business without it being just high earners who reap the benefits of measures aimed at incentivising all employees. We will keep you up to date on how this develops.
Hong Kong
Salary deductions for the purpose of acquiring shares in an employee share plan are technically not permitted in Hong Kong. However, recent practice would indicate a change in practice as the Hong Kong Labour Department has recently allowed one of Tapestry’s clients to use salary deductions in the context of their plan.
Tapestry comment
Whilst this may signal a welcome change in practice, the law still prohibits salary deductions. Therefore, if you want to make salary deductions, you may want to consider approaching the Hong Kong Labour Department directly on this issue, although we recommend local advice is sought before doing so.
Luxembourg
From 21 March 2019, non-resident tax payers in Luxembourg can request to be treated the same as resident tax payers, subject to conditions.
Tapestry comment
The ability to be treated as a resident tax payer may prove to be beneficial to companies dealing with mobile participants, however this administrative benefit comes with the obligation to report on all worldwide income.
Saudi Arabia
From 1 April 2019, changes to Saudi securities laws took effect. These changes simplified the securities regime so that companies can offer shares to employees without having to follow the ‘authorised person’ requirements. Companies will be subject to a quarterly reporting obligation, but overall this change will mean companies find it easier to offer awards here.
Tapestry comment
Since this new regime came into effect, Tapestry have seen a number of clients take advantage of it. In some cases, companies which have historically only used cash in Saudi Arabia are now switching to using shares in their awards.
Singapore
From 1 April 2019, there is no longer any need to get approval from the Ministry of Manpower to make salary deductions in Singapore. Salary deductions will now be permitted provided that: (a) the employee willingly consents in writing; and (b) the employee must be able to withdraw consent at any time, without any penalty.
Tapestry comment
This is a really helpful change in Singapore which will allow for increased company flexibility and possibly an increase in the use of purchase plans there. Companies will no longer have to go down the route of obtaining Ministry of Manpower consent which was a complex and time consuming process.
UK
The UK’s departure from the EU is currently anticipated to be 31 October 2019 (“Brexit Day”). The UK is enacting legislation which will convert the prevailing EU law at the moment of Brexit into UK law so that, broadly, the same rules and laws will apply on the day after Brexit Day as on the day before.
A withdrawal agreement which governs how the UK will leave the EU and the basis for the longer term UK/EU relationship has also been reached. This agreement provides for a transition period which will apply from Brexit Day until 31 December 2020. During the transition, the UK will effectively be treated as a member of the EU for most EU laws. However, the UK has yet to formally ratify the withdrawal agreement meaning the UK could leave the EU without any agreed terms if the withdrawal agreement is not approved by the UK Parliament by Brexit Day. There is currently no consensus in the UK Parliament on the Brexit process. This has led to the resignation of Prime Minister Theresa May and means the UK will soon have a new Prime Minister who may attempt to renegotiate the terms of the withdrawal agreement. If it or another withdrawal agreement is agreed before 31 October, Britain will leave the EU on the first day of the following month. Otherwise the UK will leave the EU on 31 October even if a withdrawal agreement has not been agreed (a “no-deal” Brexit).
Tapestry comment
Considering the current political climate in the UK - how, or even if, the UK will leave the EU is still very much unknown! If you have any concerns on how Brexit could impact your compliance obligations, please do get in touch.