Staying ahead of the curve on regulatory and tax compliance is a never-ending task for companies.
To help you keep on top of recent developments, here is our second quarterly Worldwide Wrap-Up of 2022, with some of the most recent changes that should be on your radar. We have summarised these topics briefly in this alert, however they will be covered in more detail along with other recent developments on our 11 May webinar.
Australia - employee share scheme tax reform
As discussed in our recent alert (here), legislation to remove the taxing point on cessation of employment for ESS awards received Royal Assent in February and will take effect from 1 July 2022. The removal of cessation of employment as a taxing point will apply to all existing ESS awards that have not yet reached a taxing point before the new law comes into effect in July.
This change brings Australia in line with many other jurisdictions, making administration of leavers much easier for global companies and giving "good leavers" the ability to settle taxes due at the applicable tax point. Where appropriate, companies should consider whether to advise participants with outstanding awards of this change to the tax treatment. Where companies have structured their ESS plans to make provision for the early tax treatment on cessation of employment (e.g., by providing for accelerated vesting or the removal of sale restrictions), they may wish to review those plan terms.
Canada - new date for extended trust reporting
Additional reporting for trusts in Canada was first proposed in 2018 (here) and is now firmly back on the agenda and due to come into force on 30 December 2022. The reporting applies to both resident and non-resident trusts. For non-resident trusts, the reporting will only apply to trusts which are already required to file a T3 return. The trusts will be required to provide additional information, including details of the identity of all trustees, beneficiaries and settlors of the trust, as well as the identity of each person who has the ability to exert control over trustee decisions regarding the appointment of income or capital of the trust.
As this change was proposed several years ago, many companies may have already factored it in to their reporting systems. In addition to the additional reporting obligations, there is a risk that trustees will not be able to provide the detailed information, either because they do not have access to the information or because they do not have the relevant consents to provide the data to the Canadian tax authorities. If you use a trust as part of your structure for offering shares to employees in Canada, you should consider whether it would be appropriate or possible to restructure the plan to remove the trust arrangement.
Global tax rates
With several countries starting the 2022 tax year in March and April, and new rates being announced since our last webinar, we will look at where rates have changed. Our international advisors provide us with new rates to update our OnTap database as quickly as they become available. In this Wrap-Up we take a brief look at some of the changes.
Bermuda - changes to payroll rates
New Zealand - increase in employee ACC levy
Singapore - proposal to increase top rate
UK - increase in social security
We will discuss the detail of these changes during our 11 May webinar.
Remember to be ahead of the game with global reporting deadlines. Coming up in the next few months:
Australia - ESS statement (employees) - 14 July and ESS report (tax office) - 14 August
India - quarterly tax certificate - 31 July
Portugal - share plan reporting on Form Modelo - 19-30 June
UK - annual employee share plan return - 6 July
If you need this information for other jurisdictions not shown above, or if you need any assistance with any global filings, please do get in touch with us.
Portugal - securities filing update
In our 11 May webinar we will discuss the pre and post-offer filings required in Portugal if a company is relying on the securities laws employee exemption. We also wanted to share with you some recent advice we have received regarding the details of those filings, including when they are not required - for example, filings may not be required if it is possible to rely on the financial thresholds exemption.
Although this latest confirmation doesn’t go as far as we would like, we are always pleased to see regulators remove unnecessary filings. We look forward to the day that all EU regulators remove the outstanding obligations for filings in relation to employee share plans!
Russia - sanctions and counter-sanctions
As the situation in Ukraine continues, the sanctions imposed both on and by Russia are making it increasingly difficult for companies assessing whether they can, and should, make awards to employees in Russia (see our discussion here). The current counter-sanctions imposed by Russia restrict the ability of companies based in countries deemed by Russia to be unfriendly (including the US, the UK, EU states and Australia) to deliver shares to employees residing in Russia. There is some uncertainty over the application of the current rules to free shares. Even where it may be argued that it is possible to deliver shares under the Russian regulations, the processes being followed by third-party administrators and banks due to other restrictions or sanctions may also make it practically impossible to deliver shares in the normal way.
Many commentators do not believe it is possible to deliver shares to Russian residents at the moment without potentially breaching the sanctions and associated rules. The market position for the majority of our clients and listed companies operating globally is that they are considering cash-settling or delaying grants/vests where possible, in order to protect both their Russian employees and the company. This is a sensitive and complex issue and each company will need to decide what is appropriate in the context of its incentive plans, whilst complying with a changing regulatory landscape.
If you have any questions, or would like to discuss any element of legal and tax compliance for your global incentive plans, do get in touch - we would be delighted to help!
Sally Blanchflower, Matthew Hunter and Rebecca Campsall