Employee Stock Options, Stock Purchase Rights, Restricted Stock and Restricted Stock Units

Transcription

1 Employee Stock Options, Stock Purchase Rights, Restricted Stock and Restricted Stock Units Argentina Colombia India Mexico Slovak Republic Australia Czech Republic Indonesia Netherlands South Africa Austria Denmark Ireland New Zealand Spain Belgium Finland Israel Norway Sweden Brazil France Italy Philippines Switzerland Canada Germany Japan Poland Taiwan Chile Hong Kong Korea Portugal Thailand China Hungary Malaysia Singapore United Kingdom This information is now available in a free app, making it more user-friendly and mobile. Available for download on your iphone, ipad or Android smartphone. Click here for details. This Matrix should not be relied upon for tax/legal advice and is not a substitute for obtaining such advice. Although every effort has been made to provide an accurate and up to-date summary based on a public company s plan, foreign laws applicable to stock plans change frequently and are often unclear in their application to U.S. plans. Also, specific plan features, structure of legal entities, types of shares used, specific tax rulings obtained, etc. may affect particular legal and tax results. Specifically, depending on the terms of the plan/grant, the tax/legal consequences can vary greatly (e.g., dividend equivalent payments may accelerate taxable event and RSUs paid out in cash may vary in tax and legal treatment). Accordingly, reliance on this chart for answering specific tax/legal questions is not advised. Instead, this Matrix should be used as a guide to potential tax/legal issues/consequences, and you should seek legal advice from Baker & McKenzie s Global Equity Services group (ges@bakermckenzie.com) before making grants. February 2013 Global Equity Services Two Embarcadero Center, 11th Floor San Francisco, California ges@bakermckenzie.com 2013 Baker & McKenzie This document is protected by U.S. copyright laws and international copyright treaties. Except for fair use, 17 USC 107 or other applicable local mandatory legal exceptions, no part of this document may be copied without the prior permission of Baker & McKenzie. Unauthorized copying will be prosecuted to the maximum extent permitted under applicable laws. No copyright is claimed in the text of statutes, regulations or court opinions quoted in this document.

2 Argentina Tax on spread at exercise. Generally, no tax at sale. A bank tax may apply to transfer of funds made in connection with employee stock plans. A personal assets tax may apply to shares acquired under an employee stock plan. A stamp tax may apply to equity award agreements. Allowed if parent under a agreement (but can trigger withholding tax and be problematic under exchange control rules). Yes. Employee and employer social insurance contributions are required. Employee social insurance contributions are subject to a monthly income ceiling. Employer social insurance contributions are not subject to income ceilings. Employer has to withhold employee s contributions. No, if private placement procedures are followed. Ability to purchase foreign currency and remit funds abroad for the purchase of shares has been suspended indefinitely pursuant to a Central Bank communication issued in July For transfers into Argentina, no prior approval is necessary; however, the funds transferred may be subject to a mandatory deposit requirement. The transferor of the funds is responsible for compliance with the exchange control restrictions. Significant entitlement issues, especially if grants made regularly/frequently. for the transfer of data abroad is Argentina ESPP Tax on discount at purchase. Generally, no tax at sale. A bank tax may apply to transfer of funds made in connection with employee stock plans. A personal assets tax may apply to shares acquired under an employee stock plan. A stamp tax may apply to equity award agreements. Allowed if parent under a agreement (but can trigger withholding tax and be problematic under exchange control rules). Employee and employer social insurance contributions are required. Employee social insurance contributions are subject to a monthly income ceiling. Employer social insurance contributions are not subject to income ceilings. Employer has to withhold employee s contributions. No, if private placement procedures are followed. Ability to purchase foreign currency and remit funds abroad for the purchase of shares has been suspended indefinitely pursuant to a Central Bank communication issued in July For transfers into Argentina, no prior approval is necessary; however, the funds transferred may be subject to a mandatory deposit requirement. The transferor of the funds is responsible for compliance with the exchange control restrictions. Significant entitlement issues, especially if grants made regularly/frequently. for the transfer of data abroad is * Payroll deductions are technically not permitted 2

3 Argentina Australia Tax at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Generally, no tax at sale. A bank tax may apply to transfer of funds made in connection with employee stock plans. A personal assets tax may apply to shares acquired under an employee stock plan. A stamp tax may apply to equity award agreements. Options granted prior to July 1, 2009: If the option is a qualifying right (which generally is the case), the employee may elect to be taxed on the market value of the award (as determined under Australian tax law) on the date of grant. Otherwise, options that are qualifying rights are generally taxed on the spread at exercise (as determined under Australian tax law). Allowed if parent under a agreement (but can trigger withholding tax and be problematic under exchange control rules). Allowed if the the parent under a agreement. Yes. Employee and employer social insurance contributions are required. Employee social insurance contributions are subject to a monthly income ceiling. Employer social insurance contributions are not subject to income ceilings. Employer has to withhold employee s contributions. Employers required to report taxable events to the tax authorities and the employee after the end of the tax year (June 30). Withholding required only if employee tax ID not provided. Contribution: Yes, Medicare (employee only). No withholding obligation for Medicare. No, if private placement procedures are followed. Prospectus generally required unless exempted under a Class Order, statutory exemption or specific relief obtained. Shareholders of Australian entity generally have to approve special termination benefits offered to directors. in connection with an ESPP. For transfers into Argentina, no prior approval is necessary; however, the funds transferred may be subject to a mandatory deposit requirement. The transferor of the funds is responsible for compliance with the exchange control restrictions. required for cash transactions in excess of A$10,000 and international fund transfers of any amount. Usually handled by the bank. Significant entitlement issues, especially if grants made regularly/frequently. Generally not, if right to terminate plan is reserved in writing. for the transfer of data abroad is for the transfer of data abroad is The data transferred should be used only for the purpose for which it was disclosed. An employee s tax file number should not be used for identification of the employee. Non-qualifying rights are taxed at grant. Payroll tax (employer only) applies to option income in all Australian 3

4 Options granted on or after July 1, 2009: Awards are subject to tax at grant, unless they are subject to a real risk of forfeiture. Awards that are subject to vesting conditions should be considered subject to a real risk of forfeiture. Provided the award is considered to be subject to a real risk of forfeiture at grant, tax will generally be at the earliest of vesting, termination of employment, or 7-year anniversary of date of grant. The taxable amount will be the market value of the options on the relevant date (as determined under Australian tax law). states and territories. Generally, payroll tax due at grant, although in all states and territories, employer may elect to pay tax at exercise of options. There is a risk that time-based awards that do not have a minimum initial vesting period of six months (where overall vesting period is three years or less) or twelve months (where overall vesting period exceeds three years) will not be considered subject to a real risk of forfeiture at grant. Tax on sale. If shares are held for at least 12 months, 50% of capital gain excluded from tax. 4

5 NOTE: Generally, if sale occurs within 30 days of taxable event, sale will be considered relevant taxable event and sale price will be used in determining the taxable amount, with no additional gain/loss on the sale. Australia Generally, tax at Allowed if the purchase on the ESPP difference between the the purchase price and parent under a market value of the shares at purchase (as determined under agreement. Australian tax law). Tax on sale. If shares are held for at least 12 months, 50% of capital gain excluded from tax. Employers required to report taxable events to the tax authorities and the employee after the end of the tax year (June 30). Withholding required only if employee tax ID not provided. Contribution: Yes, Medicare (employee only). No withholding obligation for Medicare. Prospectus generally required unless exempted under a Class Order, statutory exemption or specific relief obtained. For ESPP, if Class Order exemption relied on, accumulated payroll deductions generally must be held in a separate bank account, but it does not need to be interest bearing. Shareholders of Australian entity generally have to approve special termination benefits offered to directors. required for cash transactions in excess of A$10,000 and international fund transfers of any amount. Usually handled by the bank. Generally not, if right to terminate plan is reserved in writing. for the transfer of data abroad is The data transferred should be used only for the purpose for which it was disclosed. An employee s tax file number should not be used for identification of the employee. Australia Awards granted prior to July 1, 2009: If the RSU is a qualifying right or the RS is a qualifying share (which should be the case), the employee Allowed if the the parent under a agreement. Payroll tax (employer only) applies to ESPP benefits in all Australian states and territories. Generally, payroll tax due at grant, although in all states and territories, employer may elect to pay tax at purchase of shares under ESPP. Employers required to report taxable events to the tax authorities and the employee after the end of the tax year (June 30). Withholding Prospectus generally required unless exempted under a statutory exemption or specific relief obtained. Not certain if Class Order exemption applies. Shareholders of Australian entity generally have to approve special termination benefits offered to required for cash transactions in excess of A$10,000 and international fund transfers of any amount. Usually handled by the bank. Generally not, if right to terminate plan is reserved in writing. for the transfer of data abroad is The data transferred should be used 5

6 may elect to be taxed required only if on the market value of employee tax ID not the award (as provided. determined under Australian tax law) on the date of grant. Contribution: Otherwise, RSUs/RS that are qualifying Yes, Medicare rights/shares are (employee only). No generally taxed on the withholding obligation market value of the for Medicare. shares at vesting (as determined under Australian tax law). Non-qualifying rights/shares are taxed at grant. Awards granted on or after July 1, 2009: Awards are subject to tax at grant, unless they are subject to a real risk of forfeiture. Awards that are subject to vesting conditions should be considered subject to a real risk of forfeiture. Provided the award is considered to be subject to a real risk of forfeiture at grant, tax will generally be at the earliest of vesting, termination of employment, or 7-year anniversary of date of grant. The taxable amount will be the market value of the shares on the relevant date (as determined under Australian tax law). Payroll tax (employer only) applies to benefits in all Australian states and territories. Generally, payroll tax due grant, although in all states and territories, employer may elect to pay tax at vesting of. directors. only for the purpose for which it was disclosed. An employee s tax file number should not be used for identification of the employee. There is a risk that 6

7 time-based awards that do not have a minimum initial vesting period of six months (where overall vesting period is three years or less) or twelve months (where overall vesting period exceeds three years) will not be considered subject to a real risk of forfeiture at grant. Tax on sale. If shares are held for at least 12 months, 50% of capital gain excluded from tax. Austria NOTE: Generally, if sale occurs within 30 days of taxable event for, sale will be considered relevant taxable event and sale price will be used in determining the taxable amount, with no additional gain/loss on the sale. Generally, tax on spread at exercise. Favorable tax regimes may apply provided certain requirements are met. No tax on sale if shares are acquired before January 1, 2011, are held for 12 months or more and certain other conditions are met. Shares acquired on or after January 1, 2011 will be subject to tax at sale. Allowed if parent under a agreement. Generally yes. Contribution: Yes, for both the employee and the employer unless ceiling met. Employer has to withhold employee s contributions. member states. fully implemented in Austria. However, stock options are not considered Minor reporting requirements may apply. Generally not, if notice is provided for each grant that plan is discretionary, voluntary and subject to termination at any time. Discrimination against part-time employees is generally prohibited. Works council (if any) may need to be advised before implementation of the plan. if not all, countries have Registration is required prior to collection, use or transfer of any employee data. Transfers outside the EU may be subject to an additional approval requirement. 7

8 Austria ESPP Austria Generally, tax on discount at purchase. Favorable tax regimes may apply provided certain requirements are met. No tax on sale if shares are acquired before January 1, 2011, are held for 12 months or more and certain other conditions are met. Shares acquired on or after January 1, 2011 will be subject to tax at sale. Generally, tax at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Favorable tax regimes may apply provided certain requirements Allowed if parent under a agreement. Allowed if parent under a agreement. Generally yes. Contribution: Yes, for both the employee and the employer unless ceiling met. Employer has to withhold employee s contributions. Generally yes. Contribution: Yes, for both the employee and the employer unless ceiling transferable securities subject to the EU Prospectus Directive. member states. In 2010, the EU Parliament approved changes to the EU Prospectus Directive which may eliminate the need to file a prospectus for U.S. listed companies. fully implemented in Austria. In Austria, ESPP rights are considered transferable securities subject to the EU Prospectus Directive. Minor reporting requirements may apply. *Payroll deductions under an ESPP have to be held in an interestbearing account unless the employee waives his/her right to be paid interest. Minor reporting requirements may apply. Generally not, if notice is provided for each grant that plan is discretionary, voluntary and subject to termination at any time. Discrimination against part-time employees is generally prohibited. Works council (if any) may need to be advised before implementation of the plan. if not all, countries have Generally not, if notice is provided for each grant that plan is discretionary, voluntary and subject to termination at any time. Discrimination against part-time employees is generally prohibited. Works council (if any) may need to be advised Registration is required prior to collection, use or transfer of any employee data. Transfers outside the EU may be subject to an additional approval requirement. Registration is required prior to collection, use or transfer of any employee data. Transfers outside the EU may be subject to an additional approval 8

9 Belgium are met. met. Employer has to withhold employee s No tax on sale if shares contributions. are acquired before January 1, 2011, are held for 12 months or more and certain other conditions are met. Shares acquired on or after January 1, 2011 will be subject to tax at sale. Tax at grant for options affirmatively accepted within 60 days of offer. Options affirmatively accepted after 60 days from offer will be taxed on spread at exercise. Under Belgium law, offer is deemed to occur once the employee is informed of the essential terms of the grant (typically when grant documents are distributed). The offer date may differ from the U.S. grant date. There is currently a proposal being reviewed by the Belgian Parliament which may adversely impact the taxation of options accepted within 60 days of offer. No tax on sale. Generally allowed if parent; however, will likely trigger social insurance contribution requirement and may increase risk of withholding and reporting obligation. A risk exists that would be considered a capital loss on shares, which is not deductible. No withholding required unless Belgian entity is a branch of the issuer or is involved in the grant of the awards or the delivery of the shares. Not certain if would be considered involvement sufficient to trigger withholding obligation. obligation exists for options accepted within 60 days of offer. For options accepted after 60 days of offer, reporting is required only to the extent a withholding obligation exists. Contribution: member states. fully implemented in Austria. In Austria, s are not considered transferable securities subject to the EU Prospectus Directive. interpretation of the Directive by these countries has not always been consistent. In general, an EU-compliant prospectus will be required for an offering of securities in any EU or EEA member state unless an exemption or exclusion applies, but it then should be possible to use this prospectus in the other EU or EEA member states. fully implemented in Belgium. The Belgian securities authorities have indicated that stock options are not subject to the EU Prospectus Directive. before implementation of the plan. if not all, countries have Generally no, if employees sign certain disclaimer language. Discrimination against union or part-time employees is prohibited. age discrimination. Belgium has adopted local rules implementing this requirement. Written notification to the employee of transfer of data abroad, registration of database and notification of data transfer to Privacy Commission are required. An agreement between the parent and the Belgian and the parent and its agents to keep information confidential is 9

10 For options accepted within 60 days of offer, social insurance contributions may be due if (1) the option is in the money at the time of the offer; or (2) the option provides a certain or stated benefit to the optionee. Otherwise, generally no social insurance contributions are due unless the sub parent, or a withholding obligation exists. Belgium Tax on discount at purchase. ESPP Favorable tax treatment may be available if employees undertake not to sell shares for two years from acquisition (likely also necessary to impose a block on the sale of the shares during such period). No tax on sale. Generally allowed if parent; however, will likely trigger social insurance contribution requirement and may increase risk of withholding and reporting obligation. A risk exists that would be considered a capital loss on shares, which is not deductible. No withholding required unless Belgian entity is a branch of the issuer or is involved in the grant of the awards or the delivery of the shares. Not certain if would be considered involvement sufficient to trigger withholding obligation. Currently, reporting is required only to the extent a withholding obligation exists. Contribution: interpretation of the Directive by these countries has not always been consistent. In general, an EU-compliant prospectus will be required for an offering of securities in any EU or EEA member state unless an exemption or exclusion applies, but it then should be possible to use this prospectus in the other EU or EEA member states. In 2010, the EU Parliament approved changes to the EU Prospectus Directive which may eliminate the need to file a prospectus for U.S. listed companies. fully implemented in Belgium. ESPP is subject to the EU Prospectus Directive. *Accumulated payroll deductions should be held by a financial institution in an account in the name of the participants with the funds attributable to each employee. Generally no, if employees sign certain disclaimer language. Discrimination against union or part-time employees is prohibited. age discrimination. Belgium has adopted local rules implementing this Written notification to the employee of transfer of data abroad, registration of database and notification of data transfer to Privacy Commission are required. An agreement between the parent and the Belgian and the parent and its agents to keep information confidential is Generally no social insurance contributions are due unless the Belgian parent, or a withholding obligation exists. 10

11 Belgium Tax at grant for RS (though argument can be made for vesting as taxable event); tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Favorable tax treatment may be available if employees undertake not to sell shares for two years from acquisition (likely also necessary to impose a block on the sale of the shares during such period). No tax on sale. Generally allowed if parent; however, will likely trigger social insurance contribution requirement and may increase risk of withholding and reporting obligation. A risk exists that would be considered a capital loss on shares, which is not deductible. No withholding required unless Belgian entity is a branch of the issuer or is involved in the grant of the awards or the delivery of the shares. Not certain if would be considered involvement sufficient to trigger withholding obligation. Currently, reporting is required only to the extent a withholding obligation exists. Contribution: member states. fully implemented in Belgium. The Belgian securities authorities have indicated that s are not subject to the EU Prospectus Directive. Generally no, if employees sign certain disclaimer language. Discrimination against union or part-time employees is prohibited. age discrimination. Belgium has adopted local rules implementing this Written notification to the employee of transfer of data abroad, registration of database and notification of data transfer to Privacy Commission are required. An agreement between the parent and the Belgian and the parent and its agents to keep information confidential is Brazil No tax on spread at exercise, unless the local parent for the spread. Tax on sale, subject to a significant monthly exclusion. Generally allowed if parent under a agreement and plan is offered to all Brazilian employees without distinction. Taking a deduction would raise risk of employee taxation at exercise. Generally no social insurance contributions are due unless the parent, or a withholding obligation exists. No, unless the local parent. With new requirement to expense awards in local entity s statutory books (under local IFRS 2 rules), possible that withholding/reporting may be required. Contribution: Onerous exchange control restrictions eliminated on March 9, 2005, but of costs by Brazilian may be problematic depending on the commercial bank chosen to handle the. of shares or other assets held abroad may be required but are employee s obligation. Significant likelihood of vested rights/entitlement claims for frequently granted options. Options with performance vesting or conditions are problematic from a severance and employment law standpoint. Employees should sign specific labor disclaimer and compliance language. for the transfer of data abroad is 11

12 Brazil ESPP Amounts Generally no, unless reimbursed benefits are granted on relating to regular basis, vesting is administrators, related to directors or performance, or local members of the board of directors parent. of Brazilian are not With new requirement deductible. In to expense awards in addition, the local entity s statutory commercial bank books (under local chosen to effect IFRS 2 rules), possible the transaction that social insurance may require prior contributions may be exchange control required. approval for, which is unlikely to be given. Cash netting to effect the is prohibited. No tax on discount at purchase, unless the local parent for the discount. Tax on sale, subject to a significant monthly exclusion. Generally allowed if parent under a agreement and plan is offered to all Brazilian employees without distinction. Taking a deduction would raise risk of employee taxation at purchase. Amounts reimbursed relating to administrators, directors or members of the board of directors No, unless the local parent. With new requirement to expense awards in local entity s statutory books (under local IFRS 2 rules), possible that withholding/reporting may be required. Contribution: Generally no, unless benefits are granted on regular basis, or local parent. With new requirement Onerous exchange control restrictions eliminated on March 9, 2005, but of costs by Brazilian may be problematic depending on the commercial bank chosen to handle the. Cash netting to remit payroll deductions under ESPP also remains problematic. of shares or other assets held abroad may be required but are employee s obligation. *Employees should expressly authorize payroll deductions made under an ESPP. Significant likelihood of vested rights/entitlement claims for ESPP. Employees should sign specific labor disclaimer and compliance language. for the transfer of data abroad is 12

13 Brazil of Brazilian to expense awards in are not local entity s statutory deductible. In books (under local addition, the IFRS 2 rules), possible commercial bank that social insurance chosen to effect contributions may be the transaction required. may require prior exchange control approval for, which is unlikely to be given. Cash netting to effect the is prohibited. Tax at vesting. Taxable amount is fair market value of the shares at vesting. Tax on sale, subject to a significant monthly exclusion. Generally allowed if parent under a agreement and plan is offered to all Brazilian employees without distinction. Amounts reimbursed relating to administrators, directors or members of the board of directors of Brazilian are not deductible. In addition, the commercial bank chosen to effect the transaction may require prior exchange control approval for, which is unlikely to be given. Cash No, unless the local parent. With new requirement to expense awards in local entity s statutory books (under local IFRS 2 rules), possible that withholding/reporting may be required. Contribution: Generally no, unless benefits are granted on regular basis, vesting is related to performance, or local parent. With new requirement to expense awards in local entity s statutory books (under local IFRS 2 rules), possible that social insurance Onerous exchange control restrictions eliminated on March 9, 2005, but of costs by Brazilian may be problematic depending on the commercial bank chosen to handle the. of shares or other assets held abroad may be required but are employee s obligation. Significant likelihood of vested rights/entitlement claims for frequently granted. with performance vesting or conditions are problematic from a severance and employment law standpoint. Employees should sign specific labor disclaimer and compliance language. for the transfer of data abroad is 13

14 Canada netting to effect contributions may be the required. is prohibited. Tax on spread at exercise. A special regime provides for a deduction of ½ of the spread at exercise (or 25% for Quebec provincial tax purposes), provided certain requirements are met. The 2010 budget eliminated the regime that previously allowed deferral of tax on the first C$100,000 worth of options that vest in a given year until sale of shares, death of employee or employee becoming non-resident. Not available for stock-settled awards. Generally, yes. Contribution: Yes, but subject to annual contribution ceiling. If applicable, employer has to withhold employee s contributions. Provincial payroll taxes levied on employers may be payable on award income. Provincial laws apply. In all provinces, most plans will be exempt from prospectus/issuer bid requirements. Discretionary relief may be required in certain instances depending on specific plan terms. Lodgment of any offer materials is required in Quebec. Generally not if right to terminate plan is reserved in writing. Employees should sign language that right to vest or purchase shares terminates as of the date employee receives notice of termination (if administered accordingly by company). Federal law requires consent from employees for collection, use or disclosure of data abroad. Special requirements apply in Quebec. Canada ESPP Canada Tax on sale. Taxable amount is one half of any capital gain. Tax on discount at purchase; no deduction or deferral available. Tax on sale. Taxable amount is one half of any capital gain. Tax at grant for RS. Generally, tax at vesting for RSU. Taxable amount is fair Not available for stock-settled awards. Not available for stock-settled awards. Generally, yes. Contribution: Yes, but subject to annual contribution ceiling. If applicable, employer has to withhold employee s contributions. Provincial payroll taxes levied on employers may be payable on award income. Generally, yes. Provincial laws apply. In all provinces, most plans will be exempt from prospectus/issuer bid requirements. Discretionary relief may be required in certain instances depending on specific plan terms. Lodgment of any offer materials is required in Quebec. Provincial laws apply. In all provinces, most plans will be exempt from prospectus/issuer bid requirements. Discretionary relief may be required in Generally not if right to terminate plan is reserved in writing. Employees should sign language that right to purchase shares terminates as of date employee receives notice of termination (if administered accordingly by company). Generally not if right to terminate plan is reserved in writing. Employees should sign Federal law requires consent from employees for collection, use or disclosure of data abroad. Special requirements apply in Quebec. Federal law requires consent from employees for 14

15 Chile market value of the shares on the tax Contribution: event; no deduction or deferral available. Tax on sale. Taxable amount is one half of any capital gain. Although not clear, our view is that no tax on spread at exercise unless parent for spread and/or takes a local deduction. If is made, some risk that employee may be subject to double taxation on the spread at exercise (once at exercise and again at sale). Regulations regarding taxation of stock awards are being considered by the tax authorities, but no draft has been published yet. Possible with but will cause employee tax on exercise and may cause to be taxed on the payment to parent. In addition, grant may have to be included in individual employee contracts (which will increase plan entitlement issues). Yes, but subject to annual contribution ceiling. If applicable, employer has to withhold employee s contributions. Provincial payroll taxes levied on employers may be payable on award income. No, unless the parent and seeks a local deduction. Contribution: Likely no, unless the parent company and seeks a local tax deduction. certain instances depending on specific plan terms. Lodgment of any offer materials is required in Quebec. Not generally. To remit funds in excess of US$10,000 for purchase of shares, employees must comply with regulations, even if cashless exercise is used. Annual reporting for foreign investments greater than US$5 million required. language that right to vest in shares terminates as of date employee receives notice of termination (if administered accordingly by company). Yes, especially if parent. May be mitigated with employee s acknowledgement and waiver. collection, use or disclosure of data abroad. Special requirements apply in Quebec. for the collection, use and transfer of data abroad is Chile ESPP Tax on sale; taxable amount depends on whether investment registered with the Chilean IRS and whether tax applied when shares were acquired. Although not clear, our view is that no tax on discount at purchase unless Possible with but will cause No, unless the parent Not generally. To remit funds in excess of US$10,000 for purchase of shares, employer (on behalf of Yes, especially if parent. May be mitigated with employee s for the collection, use and transfer 15

16 parent for employee tax on and seeks a local discount and/or takes purchase and deduction. a local deduction. If may cause is to be made, some risk that taxed on the Contribution: employee may be subject to double payment to Likely no, unless taxation on the parent. discount at purchase the parent company (once at purchase and and seeks a local tax again at sale). deduction. Regulations regarding taxation of stock awards are being considered by the tax authorities, but no draft has been published yet In addition, grant may have to be included in individual employee contracts (which will increase plan entitlement issues). employees) must comply with regulations. Annual reporting for foreign investments greater than US$5 million required. acknowledgement and waiver. of data abroad is Chile Tax on sale; taxable amount depends on whether investment registered with the Chilean IRS and whether tax applied when shares were acquired. Tax at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Tax on sale; taxable amount depends on whether investment registered with the Chilean IRS. Possible with but may cause to be taxed on the payment to parent. In addition, grant may have to be included in individual employee contracts (which will increase plan entitlement issues). No, unless the parent and seeks a local deduction. Contribution: Likely yes, regardless of, unless applicable contribution ceiling met. Employee has to withhold employee s contributions. No employer contributions. Not generally. Annual reporting for foreign investments greater than US$5 million required. Yes, especially if parent. May be mitigated with employee s acknowledgement and waiver. for the collection, use and transfer of data abroad is 16

17 China Tax on spread at exercise. *If Notice 35 completed (see Withholding & section) and certain other requirements met, tax may be calculated under a favorable formula which generally results in reduction of taxation. Tax on sale. Possible with, especially if under a agreement between and parent. However, if the cost of the plan is categorized as an administration / management fee by the foreign parent, the cost probably will not be eligible for a tax deduction. In addition, may require exchange control approval (depending on the amount of the payment) and/or may be subject to additional requirements imposed by the bank handling the (cash netting to effect the is prohibited). Withholding and reporting required at the taxable event. Notice 35 filing required with local tax bureau prior to implementation of the plan. Specific reporting requirements vary by province. Contribution: Although uncertain, social insurance contributions are likely not required. Approval from China Securities Regulatory Commission ( CSRC ) is required as a technical matter, but compliance is not feasible due to current lack of procedures. Practical risk is low if cashless sell-all exercise method is mandated, because no employee funds put at risk and shares held for only a moment in time. CSRC is aware of unapproved employee stock option plans implemented by foreign companies in China and has informally expressed no current intention to take action against such companies. Chinese foreign exchange control regulations limit the remittance and conversion of foreign currency to US$50,000 on an annual basis, unless the employee provides supporting documentation. In addition, under Circular 7 issued by the Central Bank and State Administration of Foreign Exchange ( SAFE ), non- PRC public companies granting equity and certain phantom awards to PRC employees must register plan with local SAFE offices where PRC entities located. As part of the application, non-prc companies are required to establish a special onshore bank account approved by SAFE through which all funds towards the purchase and from the sale of shares under the plan must be funneled. Companies are required to repatriate all equity plan proceeds realized by PRC employees through the approved onshore bank account. Once registration is completed, quarterly (or monthly) reporting requirements apply. In addition, companies must request approval for an annual quota Generally not if the right to modify or terminate is stated in the plan and employees agree to such terms in writing. Regulations require that part-time employees be given benefits based on the number of hours they work. This could be interpreted to apply to participation in an equity plan. There is risk that equity awards could be deemed a payment of wages inkind or in negotiable securities, thereby constituting an illegal payment of wages in China. However, it is unlikely that local labor authorities would object to the issuance of equity awards or stock under an employee stock plan, which are in the form of bonuses and are in addition to regular wages. PRC regulations effective from January 1, 2008 require that employers keep confidential an employee s personal data/information, and not publicize such data without the employee s consent. Because data collected for equity plan participation would likely be considered personal data, and data transfer to a third party would likely be considered publicizing such data, obtaining employee s consent for the collection, use and transfer of data In addition, transmitting data from the PRC to the United States may be subject to regulation in the PRC. 17

18 which establishes the maximum amount that can be sent out of China through the special SAFEapproved account per year to purchase shares (for options exercisable using a cash exercise method). Interpretations of Circular 7 by local SAFE offices are inconsistent and change frequently. NOTE: Cash-settled awards paid by a non- PRC entity generally are subject to Circular 7. Cash awards paid locally likely are not subject to Circular 7. China ESPP Tax on discount at purchase. *If Notice 35 completed (see Withholding & section) and certain other requirements met, tax may be calculated under a favorable formula which generally results in reduction of taxation. Tax on sale. Possible with, especially if under a agreement between and parent. However, if the cost of the plan is categorized as an administration / management fee by the foreign parent, the cost probably will not be eligible for a tax deduction. In addition, Withholding and reporting required at the taxable event. Notice 35 filing required with local tax bureau prior to implementation of the plan. Specific reporting requirements vary by province. Contribution: Although uncertain, social insurance contributions are likely not required. Approval from China Securities Regulatory Commission ( CSRC ) is required as a technical matter, but compliance is not feasible due to current lack of procedures. Regulatory risk is greater because employees remit funds for purchase and then hold securities. Risk can be mitigated if employees are required to immediately sell shares when acquired. There is no equivalent to Circular 7 for private non- PRC companies granting equity awards in the PRC. Chinese foreign exchange control regulations limit the remittance and conversion of foreign currency to US$50,000 on an annual basis, unless the employee provides supporting documentation. In addition, under Circular 7 issued by the Central Bank and State Administration of Foreign Exchange ( SAFE ), non- PRC public companies granting equity and certain phantom awards to PRC employees must register plan with local SAFE offices where PRC Generally not if the right to modify or terminate is stated in the plan and employees agree to such terms in writing. Regulations require that part-time employees be given benefits based on the number of hours they work. This could be interpreted to apply to participation in an equity plan. There is risk that equity awards could be deemed a payment of wages inkind or in negotiable securities, thereby constituting an illegal payment of wages in PRC regulations effective from January 1, 2008 require that employers keep confidential an employee s personal data/information, and not publicize such data without the employee s consent. Because data collected for equity plan participation would likely be considered personal data, and data transfer to a third party would likely be 18

19 may require exchange control approval (depending on the amount of the payment) and/or may be subject to additional requirements imposed by the bank handling the (cash netting to effect the is prohibited). entities located. As part of the application, foreign companies are required to establish a special onshore bank account approved by SAFE through which all funds towards the purchase and from the sale of shares under the plan must be funneled. Companies are required to repatriate all equity plan proceeds realized by PRC employees through the approved onshore bank account. Once registration is completed, quarterly (or monthly) reporting requirements apply. In addition, companies must request approval for an annual quota which establishes the maximum amount that can be sent out of China through the special SAFEapproved account per year to purchase shares. China. However, it is unlikely that local labor authorities would object to the issuance of equity awards or stock under an employee stock plan, which are in the form of bonuses and are in addition to regular wages. Labor law regulations prohibit PRC employers from making deductions salaries unless authorized under law; therefore, payroll deductions are technically problematic. However, these restrictions are unlikely to be enforced in the context of an ESPP. The risk may be reduced if employees expressly consent to payroll deductions, and it is made clear that the ESPP contributions do not reduce overall remuneration. considered publicizing such data, obtaining employee s consent for the collection, use and transfer of data In addition, transmitting data from the PRC to the United States may be subject to regulation in the PRC. Interpretations of Circular 7 by local SAFE offices are inconsistent and change frequently. China Tax likely at vesting for. Taxable amount is fair market value of the shares on the tax event. Possible with sub, especially if under a Withholding and reporting required at the taxable event. Approval from China Securities Regulatory Commission ( CSRC ) is required as a technical matter, but compliance is not feasible due to current lack of procedures. NOTE: There is no equivalent to Circular 7 for private non-prc companies granting equity in the PRC. Chinese foreign exchange control regulations limit the remittance and conversion of foreign Generally not if the right to modify or terminate is stated in the plan and employees agree to such terms in writing. PRC regulations effective from January 1, 2008 require that employers keep 19

20 agreement *If Notice 35 between sub and Notice 35 or equivalent completed (see parent. However, filing may be required Withholding & if the cost of the with local tax bureau section) and plan is prior to certain other categorized as an implementation of the requirements met, tax administration / plan. Specific reporting may be calculated management fee requirements vary by under a favorable by the foreign province. formula which parent, the cost generally results in probably will not reduction of taxation. be eligible for a Contribution: tax deduction. Tax on sale. In addition, may require exchange control approval (depending on the amount of the payment) and/or may be subject to additional requirements imposed by the bank handling the (cash netting to effect the is prohibited). Although uncertain, social insurance contributions are likely not required. Risk is reduced because s are offered for no consideration (thus no funds are remitted). Risk is further mitigated if employees are required to immediately sell shares when acquired. currency to US$50,000 on an annual basis, unless the employee provides supporting documentation. In addition, under Circular 7 issued by the Central Bank and State Administration of Foreign Exchange ( SAFE ), non- PRC public companies granting equity and certain phantom awards to PRC employees must register plan with local SAFE offices where PRC entities located. As part of the application, foreign companies are required to establish a special onshore bank account approved by SAFE through which all funds from the sale of shares under the plan must be funneled. Companies are required to repatriate all equity plan proceeds realized by PRC employees through the approved onshore bank account. Regulations require that part-time employees be given benefits based on the number of hours they work. This could be interpreted to apply to participation in an equity plan. There is risk that equity awards could be deemed a payment of wages inkind or in negotiable securities, thereby constituting an illegal payment of wages in China. However, it is unlikely that local labor authorities would object to the issuance of equity awards or stock under an employee stock plan, which are in the form of bonuses and are in addition to regular wages. confidential an employee s personal data/information, and not publicize such data without the employee s consent. Because data collected for equity plan participation would likely be considered personal data, and data transfer to a third party would likely be considered publicizing such data, obtaining employee s consent for the collection, use and transfer of data In addition, transmitting data from the PRC to the United States may be subject to regulation in the PRC. Once registration is completed, quarterly (or monthly) reporting requirements apply. Interpretations of Circular 7 by local SAFE offices are inconsistent and change frequently. NOTE: Cash-settled awards paid by a non- PRC entity generally are 20

21 subject to Circular 7. Cash awards paid locally likely are not subject to Circular 7. Colombia Colombia ESPP Arguably, no tax at exercise, unless parent for spread. If parent, spread would be treated as labor income and tax would be due at exercise. Tax on sale. Arguably, no tax at purchase, unless parent for discount. If parent, discount would be treated as labor income and tax would be due at purchase. Tax on sale. Yes, if parent and withholding and social insurance obligations are satisfied (see Withholding and section). To mitigate exchange control issues, intercompany accounting entries (i.e., cash netting) to effect are preferred. Yes, if parent and withholding and social insurance obligations are satisfied (see Withholding and section). To mitigate exchange control issues, intercompany accounting entries (i.e., cash netting) to effect are preferred. No, unless the parent and claims a local deduction or is otherwise involved in the grant. Contribution: No, unless is made. Even if, no social insurance if there is an agreement that the benefits are not part of salary. No, unless the parent and claims a local deduction or is otherwise involved in the grant. Contribution: No, unless is made. Even if, no social insurance if there is an agreement that the benefits are not part of salary. Yes, onerous filing requirement if over 99 offerees, but separate and distinct offerings need not be aggregated. Yes, onerous filing requirement if over 99 offerees, but separate and distinct offerings need not be aggregated. There is no equivalent to Circular 7 for private non- PRC companies granting equity in the PRC. If funds are remitted to purchase shares, an exchange declaration is required and investment is automatically registered with the Bank of the Republic. May apply to. If employee s aggregate investments abroad are $500,000 or more, investments must be registered with the Bank of the Republic. If funds are remitted to purchase shares, an exchange declaration is required and investment is automatically registered with the Bank of the Republic. May apply to. If employee s aggregate investments abroad are $500,000 or more, investments must be registered with the Bank of the Republic. Yes, but may be mitigated with employee agreement that grant is discretionary, that the plan is subject to termination and that benefits are not salary. Yes, but may be mitigated with employee agreement that grant is discretionary, that the plan is subject to termination and that benefits are not salary. from the employee for the collection, use and transfer of data abroad before implementing the plan is from the employee for the collection, use and transfer of data abroad before implementing the plan is 21