New filing obligations apply to all share plans operating in Luxembourg. These apply to new plans due to be set up from 1 January as well as to existing plans.
On 28 December 2015, the Luxembourg tax authorities issued a circular (circular L.I.R. n° 104/2bis) which sets out new reporting obligations in respect of current and new share plans implemented by Luxembourg employers. The circular applies to any Luxembourg employer, including a subsidiary or branch of a foreign parent company making awards in Luxembourg.
What is the scope of the new regulations?
The circular applies to employee stock option plans implemented after 31 December 2015 as well as to plans which were implemented before 2016 but under which further awards can be made.
Although the circular refers specifically to ‘stock option plans’, our Luxembourg lawyers have advised that the circular applies to any type of employee share plan and that it would be prudent to make a filing even for a cash plan if the plan could be satisfied by an issue of shares.
What is required?
The circular requires employers to file a copy of the share plan rules (and any other documents which set out the terms of the award) and a list of the plan participants with the local withholding tax office two months before setting up a new plan and as soon as possible for all existing plans.
What happens if this is not done?
The circular does not specify any penalty for non-compliance.
The circular is a brief, half-page document and raises some practical issues:
- It would appear that this new requirement was rushed through and a number of important issues are still being resolved.
- It is not clear how the two month notification period will apply for plans which are due to be implemented before the end of February 2016 or which existed before that date. This point has been raised with the Luxembourg tax authorities and further guidance is expected but in the meantime local counsel recommends acting as quickly as possible to make the filing.
- The filing requirement refers to the plan rules and the names of the participants (so there is no requirement to include the value of any awards granted). However, even this limited level of information may cause difficulties where the names of the participants are not known at the outset of the plan.
Complying with the circular should be a straightforward procedure although it will need to be updated each year.