Key International Updates: The 411 on the Tax and Legal Changes You Need to Know Now for Global Equity Grants

By Robyn Shutak posted 03-01-2016 12:45


Tax and legal changes present challenges as well as planning opportunities for global equity plan sponsors.  What worked well for companies' 2015 equity grants and ESPP offerings will not necessarily be optimal in 2016 or beyond.  Further, compliance requirements in some countries have recently changed (or are about to do so).  Some changes facilitate issuers' ability to offer equity awards and ESPP plans,  while other changes add to the existing compliance burden.

For example, on the positive side, cash-settled options and ESPP plans are once again permissible in Argentina due to the relaxation of exchange control laws that went into effect several years ago.  (As of this writing, Argentinian banks are developing procedures for Argentinian residents to send funds abroad under the new rules and therefore the feasibility of granting cash-settled options and offering ESPPs will depend in part on the procedures imposed by the banks.)  Plan sponsors that avoided granting options in Australia due to unfavorable tax treatment that went into effect in 2009 may wish to consider granting options to participants in 2016 and beyond.  France, which had all but eliminated the tax advantages of French qualified RSUs, enacted the Loi Macron in August 2015, sparking interest among issuers in granting French-qualified RSUs under the Macron regime.  New tax legislation affecting equity awards has taken effect in Greece and Romania.  Options, which generally receive favorable tax treatment in Canada, may become less attractive under Canadian tax law for high income earners there.

The trend in recent years of increased emphasis on tax reporting and withholding continues. At the end of last year,  the Luxembourg tax authorities issued a circular that requires employers to notify the local tax authorities at least two months advance of upcoming stock option grants (and presumably grants of other forms of equity).  France will require income tax withholding  on compensation income (which likely will include equity awards effective in 2018). (France currently requires income tax withholding on equity income in the case of employees transferring abroad.)  New Zealand is expected to implement mandatory reporting and optional withholding requirements in 2017.   

Under a proposed EU Regulation, relief from having to file an EU prospectus may finally be in sight for non-EU listed companies who wish to offer an employee stock purchase plan to participants in the EU.  On the other hand, new securities law requirements take effect in New Zealand in December 2016 and RSUs and other 'free shares' may now have to fall within one of the new exemptions to avoid having to file a prospectus in New Zealand.   

The global trend of enacting data privacy laws (and strengthening existing ones) continues. Most notably, the EU is revamping its data protection laws and the EU-U.S. safe harbor has been invalidated.  Our session at GEO's 17th Annual Conference will touch on data privacy developments briefly as time permits. There will be a separate session on data privacy at the conference.

Staying on top of tax and legal changes is critical for equity plan sponsors who want to take advantage of favorable changes and avoid being blindsided by new compliance requirements.  Our panel consists of two advisors and two issuers.  In addition to discussing new developments, the panel will address how issuers are responding to the new changes and practical takeaways for the audience.  We look forward to seeing you at GEO's 17th Annual Conference in Boston this April.

June Anne Burke, Baker & McKenzie LLP, Barbara Klementz, Baker & McKenzie LLP, Veena Bhatia, Gilead Sciences, Inc., Debbie Tsoi-A-Sue, Yahoo!,  Inc.    

Register for the conference here!