© 2017 Baker McKenzie. 1 The Global Equity Matrix Cash Awards, Employee Stock Options, Stock Purchase Rights, Restricted Stock and Restricted Stock Units Argentina Australia Austria Belgium Brazil Canada Chile China Colombia Czech Republic Denmark Egypt Finland France Germany Hong Kong Hungary India Indonesia Ireland Israel Italy Japan Korea Malaysia Mexico Morocco Netherlands New Zealand Norway Peru Philippines Poland Portugal Russia Saudi Arabia Singapore Slovak Republic South Africa Spain Sweden Switzerland Taiwan Thailand Turkey Ukraine United Arab Emirates United Kingdom United States Vietnam October 2017 Global Equity Services Two Embarcadero Center, 11 Floor San Francisco, California 94111 +1 (415) 576 3000 [email protected] The information in 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 todate summary based on grants to employees under a public company’s plan, laws applicable to stock plans change frequently and are often unclear in their application to awards offered by a company in another country. Also, specific plan features, structure of legal entities, industry of issuer, types of shares used, specific tax rulings obtained, etc. may affect 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 the taxable event for RSUs). Accordingly, reliance on this information for answering specific tax/legal questions is not advised. Instead, the information in this matrix should be used only as a guide to potential tax/legal issues/consequences, and you should seek legal advice from Baker & McKenzie’s Global Equity Services group legal issues/consequences, and you should seek legal advice from Baker & McKenzie’s Global Equity Services group ([email protected]) before making grants. ©2017 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 written 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. At Your Fingertips – Global Equity Services Resources The Global Equity Matrix App Information on the key compliance issues for equity awards, covering tax and securities, exchange control, labor and data privacy issues in 50 countries. Available for download on your iPhone, iPad or Android smartphone. The Global Equity Equation Blog Visit our blog today for the latest developments in global equity-based compensation. The Compensation Connection Blog Visit our blog for the latest developments in executive compensation and employee benefits:. Talking Stock Podcast Series "Talking Stock," our latest podcast series provides global equity guidance on demand. © 2017 Baker McKenzie. 2 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Argentina OPTION Tax on spread at exercise. Tax on 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 execution of hardcopy equity award agreements. Allowed if subsidiary reimburses parent under a written agreement. Income Tax: Yes, employers required to withhold and report the taxable amount at the time of exercise. Social Insurance Contributions: 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. Restrictions on the ability to purchase foreign currency and remit funds abroad for the purchase of shares have been lifted pursuant to a series of Central Bank communications issued in 2015 and 2016. Outward remittances are no longer subject to a monthly limit per individual/local entity, but in order to effect the foreign fund transfer from Argentina, certain steps must be taken. For transfers into Argentina, no prior approval is necessary; however, certain exchange control requirements may apply. The transferor of the funds is responsible for compliance with exchange control restrictions. Significant entitlement issues, especially if grants made regularly/frequently. Written consent from employees for the transfer of data abroad is strongly recommended. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Argentina ESPP Tax on discount at purchase. Tax on 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 execution of hardAllowed if subsidiary reimburses parent under a written agreement. Income Tax: Yes, employers required to withhold and report the taxable amount at purchase. Social Insurance Contributions: Employee and employer social insurance contributions are required. Employee social insurance contributions are No, if private placement procedures are followed. Restrictions on the ability to purchase foreign currency and remit funds abroad for the purchase of shares have been lifted pursuant to a series of Central Bank communications issued in 2015 and 2016. Outward remittances are no longer subject to a monthly limit per individual/local entity, but in order to effect the foreign fund transfer from Significant entitlement issues, especially if grants made regularly/frequently. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 3 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy copy equity award agreements. subject to a monthly income ceiling. Employer social insurance contributions are not subject to income ceilings. Employer has to withhold employee’s contributions. Argentina, certain steps must be taken. For transfers into Argentina, no prior approval is necessary; however, certain exchange control requirements may apply. The transferor of the funds is responsible for compliance with exchange control restrictions. * Payroll deductions are technically not permitted in connection with an ESPP. Argentina RS/RSU 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. 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 execution of hardcopy enrollment documents. Allowed if subsidiary reimburses parent under a written agreement. Income Tax: Yes, employers required to withhold and report the taxable amount at the time of the taxable event. Social Insurance Contributions: 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. For transfers into Argentina, no prior approval is necessary; however, certain exchange control requirements may apply. The transferor of the funds is responsible for compliance with exchange control restrictions. Significant entitlement issues, especially if grants made regularly/frequently. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 4 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Argentina Cash Award Likely taxed at payment. Taxable amount is amount of the cash payment. 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 execution of hardcopy equity award agreements. Generally yes, because the subsidiary bears the cost of awards. Written agreement recommended. Income Tax: Yes, employers required to withhold and report the taxable amount at the time of payment. Social Insurance Contributions: 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. No. Significant entitlement issues, especially if grants made regularly/frequently. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Australia OPTION Options granted on or after July 1, 2015: Tax will generally be at exercise unless the shares issued at exercise are subject to genuine restrictions on disposal, in which case tax is deferred until the restrictions lapse. An earlier tax event can occur at termination of employment, provided the employee does not forfeit the option upon termination. If taxed at exercise, the taxable amount will be the difference between the market value of the shares at exercise (as determined under Allowed if the subsidiary reimburses the parent under a written reimbursement agreement. Income 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. Social Insurance Contribution: Yes, Medicare Levy (including possibly a Medicare Levy surcharge) (employee only). No withholding obligation for levy/surcharge. Prospectus generally required unless exempted under Class Order 14/1000 (public companies), Class Order 14/1001 (private companies), statutory exemption or specific relief obtained. If Class Order relied on, notice filing must be completed. Contact Baker McKenzie for more details. Shareholders of Australian entity may have to approve special termination benefits offered to directors of the Australian entity. Reporting 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. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 5 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Australian tax law) and the exercise price. Options granted between July 1, 2009 and June 30, 2015: 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). 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. Options granted prior to July 1, 2009: If the option is a Payroll tax (employer only) applies to option income 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 exercise of options. © 2017 Baker McKenzie. 6 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy qualifying right (which generally is the case), the employee may elect to be taxed on the market value of the option (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). Non-qualifying rights are taxed at grant. Tax on sale. If shares are held for at least 12 months, 50% of capital gain excluded from tax. 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 ESPP Generally, tax at purchase on the difference between the purchase price and market value of the shares at purchase (as determined under Australian tax law). Tax on sale. If shares are held for at least 12 months, 50% of capital gain excluded from tax. NOTE: Generally, if sale occurs within 30 days of the taxable event, sale will be Allowed if the subsidiary reimburses the parent under a written reimbursement agreement. Income 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. Social Insurance Contribution: Yes, Medicare Levy Prospectus generally required unless exempted under Class Order 14/1000 (public companies), Class Order 14/1001 (private companies), statutory exemption or specific relief obtained. If Class Order exemption relied on, notice filing must be completed and payroll deductions must be held in separate bank account. Contact Baker McKenzie for more details. Shareholders of Australian entity may have to approve special termination benefits offered to directors of the Australian entity. Reporting 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. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 7 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy considered relevant taxable event and sale price will be used in determining the taxable amount, with no additional gain/loss on the sale. (including possibly a Medicare Levy surcharge) (employee only). No withholding obligation for levy/surcharge. 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. Australia RS/RSU 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” and certain other conditions are met. 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 and the other conditions are met, tax will generally be at the earliest of vesting, termination of employment, or 7-year anniversary of date of grant (for awards granted on or after July 1, 2015, tax will be at earliest of vesting, termination of employment or 15-year anniversary of date of Allowed if the subsidiary reimburses the parent under a written reimbursement agreement. Income 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. Social Insurance Contribution: Yes, Medicare Levy (including possibly a Medicare Levy surcharge) (employee only). No withholding obligation for levy/surcharge. Payroll tax (employer only) applies to RS/RSU benefits in all Australian states and territories. Generally, payroll tax due grant, although in all states and territories, employer Prospectus generally required unless exempted under Class Order 14/1000 (public companies), Class Order 14/1001 (private companies), statutory exemption or specific relief obtained. If Class Order relied on, notice filing must be completed. Contact Baker McKenzie for more details. Shareholders of Australian entity may have to approve special termination benefits offered to directors of the Australian entity. Reporting 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. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 8 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy grant). The taxable amount will be the market value of the shares on the relevant date (as determined under Australian tax law). 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. NOTE: Generally, if sale occurs within 30 days of taxable event for RS/RSU, 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. may elect to pay tax at vesting of RS/RSUs. Australia Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: Withholding required including Medicare Levy (and, if applicable, surcharge). Subsidiary must also report all taxable events to the Although cash-settled awards are considered as derivatives subject to disclosure, licensing and prospectus requirements, relief is likely available under the Australian Securities and Investment Commission Class Order 14/1000 or Class Order 14/1001. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such © 2017 Baker McKenzie. 9 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Australian Tax Office on an annual basis on a prescribed form. Social Insurance Contributions: Yes, the employer must make quarterly superannuation contributions. as notification or registration obligations). Austria OPTION 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 and certain other conditions are met. Shares acquired on or after January 1, 2011 will be subject to tax at sale. Allowed if subsidiary reimburses parent under a written reimbursement agreement and the cost represents a business expense as it relates to the subsidiary’s employees. Income Tax: Generally yes. Social Insurance Contribution: Yes, for both the employee and the employer unless employee's contribution ceiling is met. Employer has to withhold employee’s contributions. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor reporting requirements may apply. Risk that awards will be counted for purposes of determining severance indemnities, termination pay, or other calculation of employee end of service benefits. Written disclaimer recommended to reduce risk. Discrimination against part-time employees is generally prohibited. Works council (if any) may need to be informed before implementation of the plan. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 10 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Austria ESPP 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 and certain other conditions are met. Shares acquired on or after January 1, 2011 will be subject to tax at sale. Allowed if subsidiary reimburses parent under a written reimbursement agreement and the cost represents a business expense as it relates to the subsidiary’s employees. Income Tax: Generally yes. Social Insurance Contribution: Yes, for both the employee and the employer unless employee's contribution ceiling is met. Employer has to withhold employee’s contributions. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. 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. Risk that benefits will be counted for purposes of determining severance indemnities, termination pay, or other calculation of employee end of service benefits. Written disclaimer recommended to reduce risk. Discrimination against part-time employees is generally prohibited. Works council (if any) may need to be informed before implementation of the plan. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Austria RS/RSU 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 are met. Allowed if subsidiary reimburses parent under a written reimbursement agreement and the cost represents a business expense as it relates to the subsidiary’s employees. Income Tax: Generally yes. Social Insurance Contribution: Yes, for both the employee and the employer unless employee's No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor reporting requirements may apply. Risk that awards will be counted for purposes of determining severance indemnities, termination pay, or other calculation of employee end of service benefits. Written disclaimer recommended to reduce risk. Discrimination against part-time employees is A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity © 2017 Baker McKenzie. 11 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy No tax on sale if shares are acquired before January 1, 2011 and certain other conditions are met. Shares acquired on or after January 1, 2011 will be subject to tax at sale. contribution ceiling is met. Employer has to withhold employee’s contributions. generally prohibited. Works council (if any) may need to be informed before implementation of the plan. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Austria Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award and such cost represents a business expense as it relates to the subsidiary’s employees. Written agreement strongly recommended. Income Tax: Generally yes. Social Insurance Contribution: Yes, for both the employee and the employer unless employee's contribution ceiling is met. Employer has to withhold employee’s contributions. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may © 2017 Baker McKenzie. 12 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Belgium OPTION Options affirmatively accepted within 60 days of offer will be taxed on 60th day after 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 actual grant date. For options affirmatively accepted within 60 days of offer, favorable tax treatment may be available if employees undertake not to exercise option for three full calendar years from grant. A stock-exchange tax applies to the exercise May be allowed if subsidiary reimburses parent; however, will likely trigger social insurance contribution requirement and may increase risk of withholding and reporting obligation. Based on recent case law, a substantial risk exists that reimbursement would be considered a capital loss on shares, which is not deductible. Income Tax: 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 reimbursement would be considered involvement sufficient to trigger withholding obligation. Reporting 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 Social Insurance Contribution: For options accepted within 60 days of No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Generally no, if employees sign certain disclaimer language. Discrimination against union or part-time employees is prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Belgium has adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in © 2017 Baker McKenzie. 13 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy of options and the sale of shares. 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. For options accepted after 60 days, social insurance may be due where the Belgian entity is involved in the grant of awards (including determining eligibility for and/or the size of awards). Otherwise, generally no social insurance contributions are due unless Belgian entity is a branch of the issuer or reimburses parent, or parent has granted award to fulfill obligation of Belgian entity. advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Belgium ESPP Tax on discount at purchase. 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). A stock-exchange tax applies to ESPP purchases and the sale of shares. May be allowed if subsidiary reimburses parent; however, will likely trigger social insurance contribution requirement and may increase risk of withholding and reporting obligation. Based on recent case law for options, a risk exists that reimbursement would be considered a capital loss on Income Tax: 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 reimbursement would be considered involvement sufficient to trigger withholding obligation. Currently, reporting is required only to the The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member None. *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. The EU Council Directive 2000/78/EC prohibits age discrimination. Belgium has adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. © 2017 Baker McKenzie. 14 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy shares, which is not deductible. extent a withholding obligation exists. Social Insurance Contribution: Social insurance may be due where the Belgian entity is involved in determining eligibility for plan participation. Otherwise, generally no social insurance contributions are due unless the Belgian entity is a branch of the issuer or reimburses parent, or parent has granted purchase rights to fulfill obligation of Belgian entity. states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Belgium RS/RSU 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). A stock-exchange tax applies to the sale of shares. May be allowed if subsidiary reimburses parent; however, will likely trigger social insurance contribution requirement and may increase risk of withholding and reporting obligation. Based on recent case law for options, a risk exists that reimbursement would be considered a capital loss on shares, which is not deductible. Income Tax: 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 reimbursement would be considered involvement sufficient to trigger withholding obligation. Currently, reporting is required only to the extent a withholding obligation exists. Social Insurance Contribution: Social insurance may be due where the No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Generally no, if employees sign certain disclaimer language. Discrimination against union or part-time employees is prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Belgium has adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") © 2017 Baker McKenzie. 15 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Belgian entity is involved in the grant of awards (including determining eligibility for and/or the size of awards). Otherwise, generally no social insurance contributions are due unless the Belgian entity is a branch of the issuer or reimburses parent, or parent has granted award to fulfill obligation of Belgian entity. will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Belgium Cash Award Tax at payment. Taxable amount is fair market value of the award on the tax event. Generally, yes, because subsidiary bears the costs of award. Written agreement recommended. Income Tax: Withholding required if the Belgian entity is involved in the grant of the awards, delivery of the cash or reimburses the issuer. Reporting required if the Belgian entity is involved in the grant of the awards, delivery of the cash or reimburses the issuer. Social Insurance Contributions: Social insurance contributions required if the Belgian entity is involved in the grant of the awards (including determining eligibility for and/or the size of awards), delivery of the cash or reimburses the issuer. None. None. Awards paid in cash through local payroll will have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Discrimination against union or part-time employees is prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Belgium has adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such © 2017 Baker McKenzie. 16 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Brazil OPTION Likely no tax at exercise, unless the subsidiary reimburses the parent for the cost of the awards or the awards are otherwise treated as part of local compensation. Tax on sale, subject to a significant monthly exclusion. Generally allowed if subsidiary reimburses parent under a written reimbursement agreement and plan is offered to all Brazilian employees without distinction. As of 2015 (or 2014, if the local subsidiary chooses), a deduction is available for the spread only if the amount is treated as compensation to the employee and is subject to withholding and social insurance contributions. As of calendar year 2015, amounts reimbursed relating to awards granted to administrators, directors or members of the board of directors of Brazilian subsidiary are deductible The commercial bank chosen to effect the transaction may require prior exchange control approval for reimbursement, which may be difficult to obtain. (Cash-netting to Income Tax: Likely no, unless the subsidiary reimburses the parent for the cost of the awards or the awards are otherwise treated as part of local compensation. With requirement to expense awards in local entity’s statutory books (under local IFRS 2 rules), possible that withholding/reporting may be required. Social Insurance Contribution: Likely due if local subsidiary reimburses parent or award income considered to be part of local compensation. If due, employer must pay employer social insurance contributions and withhold employee portion of social insurance contributions (subject to monthly contribution ceiling for employee portion only). If no reimbursement and income not None. Reimbursement of costs by Brazilian subsidiary may be problematic because commercial bank chosen to handle the remittance may question the transaction and/or request that Central Bank approval be obtained. Cash-netting to remit reimbursement of option costs prohibited. Reporting of shares or other assets held abroad may be required but are employee’s obligation. Significant likelihood of vested rights/entitlement claims for options. Options with performance vesting conditions (where performance is based on employee's performance) are problematic from a severance and employment law standpoint. Employees should sign specific labor disclaimer and compliance language. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 17 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy effect the reimbursement is prohibited.) considered part of local compensation, social insurance contribution obligations uncertain due to tax court rulings since 2013 which reached different conclusions. Brazil ESPP Likely no tax on discount at purchase, unless the subsidiary reimburses the parent for the cost of the awards or the awards are otherwise treated as part of local compensation. Tax on sale, subject to a significant monthly exclusion. Generally allowed if subsidiary reimburses parent under a written reimbursement agreement and plan is offered to all Brazilian employees without distinction. As of 2015 (or 2014, if the local subsidiary chooses), a deduction is available for the discount only if the amount is treated as compensation to the employee and is subject to withholding and social insurance contributions. As of calendar year 2015, amounts reimbursed relating to awards granted to administrators, directors or members of the board of directors of Brazilian subsidiary are deductible. The commercial bank chosen to effect the transaction may require prior exchange control approval for reimbursement, Income Tax: Likely no, unless the subsidiary reimburses the parent for the cost of the awards or the awards are otherwise treated as part of local compensation. With requirement to expense awards in local entity’s statutory books (under local IFRS 2 rules), possible that withholding/reporting may be required. Social Insurance Contribution: Likely due if local subsidiary reimburses parent or award income considered to be part of local compensation. If due, employer must pay employer social insurance contributions and withhold employee portion of social insurance contributions (subject to monthly contribution ceiling for employee portion only). None. Employees may be required to provide local entity with separate authorization form regarding payroll deductions made under an ESPP to enable local entity to remit payroll deductions out of Brazil. Reimbursement of costs by Brazilian subsidiary may be problematic because commercial bank chosen to handle the remittance may question the transaction and/or request that Central Bank approval be obtained. Cash-netting to remit payroll deductions under ESPP or reimbursement of ESPP costs prohibited. Reporting of shares or other assets held abroad may be required but are employee’s obligation. Significant likelihood of vested rights/entitlement claims for ESPP. Employees should sign specific labor disclaimer and compliance language. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 18 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy which may be difficult to obtain. (Cash-netting to effect the reimbursement is prohibited.) If no reimbursement and income not considered part of local compensation, social insurance contribution obligations uncertain due to tax court rulings since 2013 which reached different conclusions. Brazil RS/RSU 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 subsidiary reimburses parent under a written reimbursement agreement and plan is offered to all Brazilian employees without distinction. As of 2015 (or 2014, if the local subsidiary chooses), a deduction is available for the value of the shares at vesting only if the amount is treated as compensation to the employee and is subject to withholding and social security contributions. As of calendar year 2015, amounts reimbursed relating to awards granted to administrators, directors or members of the board of directors of Brazilian subsidiary are deductible. The commercial bank chosen to effect Income Tax: Likely no, unless the local subsidiary reimburses parent or RS/RSU income considered to be part of local compensation. With requirement to expense awards in local entity’s statutory books (under local IFRS 2 rules), possible that withholding/reporting may be required. Social Insurance Contribution: Likely due if local subsidiary reimburses parent or award income considered to be part of local compensation. If due, employer must pay employer social insurance contributions and withhold employee portion of social insurance contributions (subject to monthly contribution ceiling None. Reimbursement of costs by Brazilian subsidiary may be problematic because commercial bank chosen to handle the remittance may question the transaction and/or request that Central Bank approval be obtained. Cash-netting to remit reimbursement of RS/RSU costs prohibited. Reporting of shares or other assets held abroad may be required but are employee’s obligation. Significant likelihood of vested rights/entitlement claims for RS/RSU. RS/RSU with performance vesting conditions (where performance is based on employee's performance) are problematic from a severance and employment law standpoint. Employees should sign specific labor disclaimer and compliance language. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 19 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy the transaction may require prior exchange control approval for reimbursement, which may be difficult to obtain. (Cash-netting to effect the reimbursement is prohibited.) for employee portion only). If no reimbursement and income not considered part of local compensation, social insurance contribution obligations uncertain due to tax court rulings since 2013 which reached different conclusions. Brazil Cash Award Tax on cash amount at payment. Yes, because the subsidiary bears the cost of awards. Written agreement recommended. Income Tax: Yes, employer is required to withhold and report income tax assuming the award is paid through local payroll. Social Insurance Contributions: Yes, employer and employer social insurance contributions will be due, but employee contributions subject to contribution ceilings. The employer must withhold the employee portion, if applicable. None. None. Significant likelihood of vested rights/entitlement claims with cash awards. Employees should sign specific labor disclaimer and compliance language. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Canada OPTION Tax on spread at exercise. A special regime provides that 50% of the spread can be deducted when calculating the taxable amount, provided certain requirements are met. For Quebec provincial income tax purposes, this deduction is only 25% Not available for stock-settled awards unless the company satisfies a number of specific requirements including retaining the discretion to settle in either cash or shares and the subsidiary Income Tax: Yes. Social Insurance Contribution: Yes, but subject to annual contribution ceiling. If applicable, employer has to pay employer Provincial laws apply. In all provinces, most plans will be exempt from prospectus/dealer registration requirements. Discretionary relief may be required in certain instances depending on specific plan terms. None. Generally not if right to terminate plan is reserved in writing and termination date for purposes of award is clearly defined. Federal law requires written consent from employees for collection, use or disclosure of data abroad. Special consent recommended for Quebec. © 2017 Baker McKenzie. 20 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy unless additional requirements are met. Please contact Baker McKenzie for more details. Tax on sale. Taxable amount is one half of any capital gain. reimburses the parent. However, if the company has the discretion to settle in cash, the 50% deduction/ special regime will not be available to employees. contributions and withhold employee’s contributions. Provincial payroll taxes levied on employers may be payable on award income. Canada ESPP Tax on discount at purchase; no deduction available. Tax on sale. Taxable amount is one half of any capital gain. Generally, not available for stocksettled awards. Income Tax: Yes. Social Insurance Contribution: Yes, but subject to annual contribution ceiling. If applicable, employer has to pay employer contributions and 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/dealer registration requirements. Discretionary relief may be required in certain instances depending on specific plan terms. None. Generally not if right to terminate plan is reserved in writing and termination date for purposes of award is clearly defined. Federal law requires written consent from employees for collection, use or disclosure of data abroad. Special consent recommended for Quebec. Canada RS/RSU Tax at grant for RS. Generally, tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event; no deduction available. If RSUs are settled in cash or can be settled in cash or shares, depending on other terms of the RSUs, salary deferral arrangement rules may apply, resulting in tax at grant. Tax on sale. Taxable amount is one half of any capital gain. Not available for stock-settled awards unless the company satisfies a number of specific requirements including retaining the discretion to settle in either cash or shares and the subsidiary reimburses the parent. However, if the company has the ability to settle in cash, it may implicate salary deferral arrangement rules such that if the Income Tax: Yes. Social Insurance Contribution: Yes, but subject to annual contribution ceiling. If applicable, employer has to pay employer contributions and 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/dealer registration requirements. Discretionary relief may be required in certain instances depending on specific plan terms. None. Generally not if right to terminate plan is reserved in writing and termination date for purposes of award is clearly defined. Federal law requires written consent from employees for collection, use or disclosure of data abroad. Special consent recommended for Quebec. © 2017 Baker McKenzie. 21 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy awards do not vest within 3 years after the end of the calendar year to which the services relate, the awards may be taxed at grant. Canada Cash Award Generally, tax at payment. Taxable amount is the amount of the cash payment. However, if the awards do not vest within 3 years after the end of the calendar year to which the services relate, salary deferral arrangement rules apply and the awards may be taxed at grant. Taxable amount would be the amount of cash payment as of grant. Generally yes, provided that subsidiary bears the cost of award. Written agreement recommended. Income Tax: Yes. Social Insurance Contributions: 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. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. There is also a risk employees could gain a right to continued cashsettled awards during employment if awards are granted regularly, giving rise to breach of contract claims or constructive dismissal claims if the awards are a significant part (10% or more) of the employee’s overall compensation. Federal law requires written consent from employees for collection, use or disclosure of data abroad. Special consent recommended for Quebec. Chile OPTION Tax likely imposed at vesting on the difference between the fair market value of the shares at vesting and the exercise price. Subsequent taxation at exercise may also be possible. Tax on sale; taxable amount may depend on whether investment registered with the Chilean IRS. Possible with subsidiary reimbursement but may cause subsidiary to be taxed on the reimbursement payment to parent. In addition, grant may have to be included in individual employee contracts (which will increase plan entitlement Income Tax: No, unless subsidiary reimburses the parent and seeks a local deduction. Social Insurance Contribution: Likely no, unless subsidiary reimburses the parent and seeks a local tax deduction. Offer of options to more than 50 individuals in Chile generally will be viewed as public offer of securities triggering a registration requirement. An exemption for employee share plan offerings may apply provided certain requirements are met and a notification is filed with the Chilean securities regulation. In addition, special securities disclaimer language required for offers to fewer than 50 individuals in Chile. Disclaimer should also be translated into Spanish. Contact Baker McKenzie for more details. To purchase shares in excess of USD10,000, employees must comply with certain reporting obligations, even if cashless exercise is used. Additional reporting required for foreign assets including investments, deposits or credits, and/or foreign securities greater than USD5 million. Yes, especially if subsidiary reimburses parent. May be mitigated with employee’s acknowledgement and waiver. Written consent from employees for the transfer of data abroad is required. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 22 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy issues). A written reimbursement agreement is recommended if a local tax deduction is sought. Chile ESPP Tax likely imposed on the discount at purchase. Tax on sale. Taxable amount is difference between sale price and acquisition cost of shares. Tax on sale; taxable amount may depend on whether investment registered with the Chilean IRS. Possible with subsidiary reimbursement but may cause subsidiary to be taxed on the reimbursement payment to parent. In addition, offer may need to be included in individual employee contracts (which will increase plan entitlement issues). A written reimbursement agreement is recommended if a local tax deduction is sought. Income Tax: No, unless subsidiary reimburses the parent and seeks a local deduction. Social Insurance Contribution: Likely no, unless subsidiary reimburses the parent and seeks a local tax deduction. Offer of ESPP to more than 50 individuals in Chile generally will be viewed as public offer of securities triggering a registration requirement. An exemption for employee share plan offerings may apply provided certain requirements are met and a notification is filed with the Chilean securities regulation. In addition, special securities disclaimer language required for offers to fewer than 50 individuals in Chile. Disclaimer should also be translated into Spanish. Contact Baker McKenzie for more details. To remit funds in excess of USD10,000 for purchase of shares, employer (on behalf of employees) must comply with certain reporting obligations. Additional reporting required for foreign assets including investments, deposits or credits, and/or foreign securities greater than USD5 million. Yes, especially if subsidiary reimburses parent. May be mitigated with employee’s acknowledgement and waiver. Written consent from employees for the transfer of data abroad is required. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Chile RS/RSU Tax at RS/RSU vesting. Taxable amount is fair market value of the shares at vesting. Tax on sale; taxable amount may depend on whether investment registered with the Chilean IRS. Possible with subsidiary reimbursement but may cause subsidiary to be taxed on the reimbursement payment to parent. In addition, grant may need to be included in individual employee contracts (which will increase plan entitlement issues). Income Tax: No, unless subsidiary reimburses the parent and seeks a local deduction. Social Insurance Contribution: Likely no, unless subsidiary reimburses the parent and seeks a local tax deduction. Offer of RS/RSUs to more than 50 individuals in Chile generally will be viewed as public offer of securities triggering a registration requirement. An exemption for employee share plan offerings may apply provided certain requirements are met and a notification is filed with the Chilean securities regulation. In addition, special securities disclaimer language required for offers to fewer than 50 individuals in Chile. Disclaimer should also be translated into Spanish. Contact Baker McKenzie for more details. Additional reporting required for foreign assets including investments, deposits or credits, and/or foreign securities greater than USD5 million. Yes, especially if subsidiary reimburses parent. May be mitigated with employee’s acknowledgement and waiver. Written consent from employees for the transfer of data abroad is required. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 23 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy A written reimbursement agreement is recommended if a local tax deduction is sought. Chile Cash Award Taxed at payment. Taxable amount is amount of cash payment. Generally, yes, because subsidiary bears the cost of award. A written agreement is recommended. Income Tax: Yes. Social Insurance Contributions: Employer has to withhold employee’s contributions. No employer contributions. None. None. Yes, may be mitigated with employee’s acknowledgement and waiver. Written consent from employees for the transfer of data abroad is required. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). China OPTION Tax on spread at exercise. *If Notice 35 filing completed (see Withholding & Reporting section) and certain other requirements met, tax may be calculated under a favorable formula which generally results in reduction of taxation. Tax on sale. Unlikely at this time as reimbursement requires exchange control approval (which is unlikely to be given as the regulations do not specifically allow for recharge payments) and/or may be subject to additional requirements imposed by the bank handling the reimbursement. (Cash-netting to effect the reimbursement is prohibited.) Income Tax: Withholding and reporting required at the taxable event. Notice 35 filing required with local tax bureau prior to implementation of the plan. Specific requirements vary by bureau. Social Insurance 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. CSRC is aware of unapproved employee stock plans implemented by foreign companies in China and has informally expressed no current intention to take action against such companies. 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. Under Circular 7 issued by the Central Bank and State Administration of Foreign Exchange (“SAFE”), non-PRC public companies granting equity awards to PRC employees must register plan with local SAFE offices where PRC entities located. As part of the registration, 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 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 PRC regulations 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 written consent for the collection, use and transfer of data recommended. In addition, transmitting data from the PRC to the issuer’s home © 2017 Baker McKenzie. 24 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy through the approved onshore bank account. Once registration is completed, quarterly reporting requirements apply. Annual reregistration may also be required in certain provinces. In addition, companies must request approval for an annual quota which establishes the maximum amount that can be sent out of China through the approved onshore bank account per year to purchase shares (for options exercisable using a cash exercise method). Finally, an amendment registration is required within 3 months of any material change (e.g., new/amended plan). Interpretations of Circular 7 by local SAFE offices are inconsistent and change frequently. Contact Baker McKenzie for latest requirements or for assistance to complete SAFE registration. NOTE: Non-PRC private companies cannot register their equity plans pursuant to Circular 7. For further information on the exchange control issues for private companies, please contact Baker McKenzie. addition to regular wages. country may be subject to regulation in the PRC. © 2017 Baker McKenzie. 25 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy China ESPP Tax on discount at purchase. *If Notice 9 tax treatment is applied to the taxable amount as annual bonus (limited to once every year), tax may be calculated under a favorable formula which generally results in reduction of taxation. However, not all tax bureaus allow favorable treatment under Notice 9 for ESPP. Tax on sale. Unlikely at this time as reimbursement requires exchange control approval (which is unlikely to be given as the regulations do not specifically allow for recharge payments) and/or may be subject to additional requirements imposed by the bank handling the reimbursement. (Cash-netting to effect the reimbursement is prohibited.) Income Tax: Withholding and reporting required at the taxable event. Social Insurance 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. CSRC is aware of unapproved employee stock plans implemented by foreign companies in China and has informally expressed no current intention to take action against such companies. Regulatory risk is greater for ESPP because employees remit funds for purchase and then hold securities. Risk can be mitigated if employees are required to immediately sell shares when acquired. Under Circular 7 issued by the Central Bank and State Administration of Foreign Exchange (“SAFE”), non-PRC public companies granting equity awards to PRC employees must register plan with local SAFE offices where PRC entities located. As part of the registration, 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 reporting requirements apply. Annual reregistration may also be required in certain provinces. In addition, companies must request approval for an annual quota which establishes the maximum amount that can be sent out of China through the approved onshore bank account per year to purchase shares. Finally, an amendment 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 a 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 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 written consent for the collection, use and transfer of data recommended. In addition, transmitting data from the PRC to the issuer’s home country may be subject to regulation in the PRC. © 2017 Baker McKenzie. 26 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy registration is required within 3 months of any material change (e.g., new/amended plan). Interpretations of Circular 7 by local SAFE offices are inconsistent and change frequently. Contact Baker McKenzie for latest requirements or for assistance to complete SAFE registration. NOTE: Non-PRC private companies cannot register their equity plans pursuant to Circular 7. If you would like further information on the exchange control issues for private companies, please contact Baker McKenzie. Labor law regulations prohibit PRC employers from making deductions from employees’ 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. © 2017 Baker McKenzie. 27 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy China RS/RSU Tax at RS/RSU vesting. Taxable amount is fair market value at vesting. *If Notice 35 completed (see Withholding & Reporting section) and certain other requirements met, tax may be calculated under a favorable formula which generally results in reduction of taxation. Tax on sale. Unlikely at this time as reimbursement requires exchange control approval (which is unlikely to be given as the regulations do not specifically allow for recharge payments) and/or may be subject to additional requirements imposed by the bank handling the reimbursement. (Cash-netting to effect the reimbursement is prohibited.) Income Tax: Withholding and reporting required at the taxable event. Notice 35 filing required with local tax bureau prior to implementation of the plan. Specific requirements vary by bureau. Social Insurance 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. CSRC is aware of unapproved employee stock plans implemented by foreign companies in China and has informally expressed no current intention to take action against such companies. Risk is reduced because RS/RSUs are offered for no consideration (thus no funds are remitted). Risk is further mitigated if employees are required to immediately sell shares when acquired. Under Circular 7 issued by the Central Bank and State Administration of Foreign Exchange (“SAFE”), non-PRC public companies granting equity awards to PRC employees must register plan with local SAFE offices where PRC entities located. As part of the registration, 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. Once registration is completed, quarterly reporting requirements apply. Annual reregistration may also be required in certain provinces. Finally, an amendment registration is required within 3 months of any material change (e.g., new/amended plan). Interpretations of Circular 7 by local SAFE offices are inconsistent and change frequently. Contact Baker McKenzie for latest requirements or for 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 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 written consent for the collection, use and transfer of data recommended. In addition, transmitting data from the PRC to the issuer’s country may be subject to regulation in the PRC. © 2017 Baker McKenzie. 28 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy assistance to complete SAFE registration. NOTE: Non-PRC private companies cannot register their equity plans pursuant to Circular 7. If you would like further information on the exchange control issues for private companies, please contact Baker McKenzie for latest requirements or for assistance to complete SAFE registration. China Cash Award Tax at payment. Taxable amount is amount of the cash payment. * If Notice 9 tax treatment is applied to the cash award as annual bonus (limited to once every year), tax may be calculated under a favorable formula which generally results in reduction of taxation. Likely yes, provided the subsidiary bears the cost of the award and makes the payment directly to the local employee. Written agreement recommended. Income Tax: Withholding and reporting required at the taxable event. Social Insurance Contributions: Although uncertain, social insurance contributions are likely not required. None. Likely not subject to Circular 7. Note, however, that cash-settled awards paid by a non-PRC entity generally are subject to Circular 7. 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. PRC regulations 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 written consent for the collection, use and transfer of data recommended. In addition, transmitting data outside the PRC may be subject to regulation in the PRC. © 2017 Baker McKenzie. 29 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Colombia OPTION Tax on spread at exercise. Tax on sale. Yes, even if subsidiary does not reimburse parent. If reimbursement used, mitigate exchange control issues by wiring of funds (either from Colombia or from a Colombian subsidiary account overseas) to effect reimbursement. Income Tax: Likely no, unless subsidiary reimburses parent and/or records an expense on its local books. Social Insurance Contribution: Not applicable, if there is an agreement that the equity award benefits are not part of salary, even if subsidiary reimburses parent. Yes, onerous filing requirement if over 99 offerees, but separate and distinct offerings need not be aggregated. If employee’s aggregate payment or investment abroad is $500,000 or more, or the local subsidiary reimburses the parent for the cost of the awards, the transaction must be registered with the Bank of the Republic. Yes, but may be mitigated with employee agreement that the grant is discretionary, the plan is subject to termination and the benefits are not salary. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Colombia ESPP Tax on the discount at purchase. Tax on sale. Yes, even if subsidiary does not reimburse parent. If reimbursement used, mitigate exchange control issues by wiring funds (either from Colombia or from a Colombian subsidiary account overseas) to effect reimbursement. Income Tax: Likely no, unless subsidiary reimburses parent and/or records an expense on its local books. Social Insurance Contribution: Not applicable, if there is an agreement that the benefits are not part of salary, even if subsidiary reimburses parent. Yes, onerous filing requirement if over 99 offerees, but separate and distinct offerings need not be aggregated. If employee’s aggregate payment or investment abroad is $500,000 or more, or the local subsidiary reimburses the parent for the cost of the awards, the transaction must be registered with the Bank of the Republic. Yes, but may be mitigated with employee agreement that the grant is discretionary, the plan is subject to termination and the benefits are not salary. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Colombia RS/RSU 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. Yes, even if subsidiary does not reimburse parent. If reimbursement used, mitigate exchange control issues by wiring of funds (either from Colombia or from a Colombian subsidiary Income Tax: Likely no, unless subsidiary reimburses parent and/or records an expense on its local books. Social Insurance Contribution: Onerous filing requirements may apply if over 99 offerees, but separate and distinct offerings need not be aggregated. If employee’s aggregate payment or investment abroad is $500,000 or more, or the local subsidiary reimburses the parent for the cost of the awards, the transaction must be registered with the Bank of the Republic. Yes, but may be mitigated with employee agreement that the grant is discretionary, the plan is subject to termination and the benefits are not salary. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or © 2017 Baker McKenzie. 30 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy overseas) to effect reimbursement. Not applicable, if there is an agreement that the benefits are not part of salary, even if subsidiary reimburses parent. registration obligations). Colombia Cash Award Tax at payment. Taxable amount is the amount of the cash payment. Generally yes, provided that the subsidiary bears the cost of award and the award is classified as “labor income.” Written agreement recommended. Income Tax: Yes. Social Insurance Contributions: Yes. Employer and employee social insurance contributions (capped) are due and employer must withhold employee portion. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, payroll taxes, etc. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Czech Republic OPTION Tax on spread at exercise. For shares acquired on or after January 1, 2014, tax on gain at sale unless shares are held for more than three years or gross annual income from the sale of shares is CZK100,000 or less. Generally allowed if subsidiary reimburses parent. Written reimbursement agreement strongly recommended. Company should not recharge costs of awards to executives or board members. Reimbursement triggers social insurance contributions and withholding/ reporting obligations. Income Tax: No, unless the local subsidiary reimburses the parent. Social Insurance Contribution: Generally, no, unless the local subsidiary reimburses the parent and is required to withhold income tax. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Reporting requirements apply to the acquisition of securities and related payments and receipts between foreign exchange residents and foreign exchange non-residents. Generally not, provided employee signs agreement acknowledging discretionary nature of the plan. Works council notification/consultation obligations apply if sub bears the costs of awards. Also, if subsidiary bears the cost of the awards, prior approval of the subsidiary’s supervisory board or board of directors is required to offer awards to executive officers or directors of the subsidiary. In addition, "performance of functions" agreement with executive officers or directors of subsidiary receiving equity should reference equity grant, be approved by shareholder A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become © 2017 Baker McKenzie. 31 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy of the subsidiary and be signed (in hard copy) by individual. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Czech Republic ESPP Tax on discount at purchase. For shares acquired on or after January 1, 2014, tax on gain at sale unless shares are held for more than three years or gross annual income from the sale of shares is CZK100,000 or less. Generally allowed if subsidiary reimburses parent. Written reimbursement agreement strongly recommended. Company should not recharge ESPP costs for executives or board members. Reimbursement triggers social insurance contributions and withholding/ reporting obligations. Income Tax: No, unless the local subsidiary reimburses the parent. Social Insurance Contribution: Generally, no, unless the local subsidiary reimburses the parent and is required to withhold income tax. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. Reporting requirements apply to the acquisition of securities and related payments and receipts between foreign exchange residents and foreign exchange non-residents. Generally not, provided employee signs agreement acknowledging discretionary nature of the plan. Employee participating in ESPP must provide a payroll deduction authorization form in Czech to the local employer, authorizing it to deduct contributions from the employee’s salary. Works council notification/consultation obligations apply if subsidiary bears the costs of awards. Also, if subsidiary bears the cost of the awards, prior approval of the subsidiary’s supervisory board or board of directors is required to offer awards to executive officers or directors of the subsidiary. In addition, A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and © 2017 Baker McKenzie. 32 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy "performance of functions" agreement with executive officers or directors of subsidiary receiving equity should reference equity grant, be approved by shareholder of the subsidiary and be signed (in hard copy) by individual. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Czech Republic RS/RSU Generally, tax at grant for RS; tax at vesting for RS/RSU. Taxable amount is fair market value of the shares on the taxable event. For shares acquired on or after January 1, 2014, tax on gain at sale unless shares are held for more than three years or gross annual income from the sale of shares is CZK100,000 or less. Generally allowed if subsidiary reimburses parent. Written reimbursement agreement strongly recommended. Company should not recharge costs of awards to executives or board members. Reimbursement triggers social insurance contributions and withholding/ reporting obligations. Income Tax: No, unless the local subsidiary reimburses the parent. Social Insurance Contribution: Generally, no, unless the local subsidiary reimburses the parent and is required to withhold income tax. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Reporting requirements apply to the acquisition of securities and related payments and receipts between foreign exchange residents and foreign exchange non-residents. Generally not, provided employee signs agreement acknowledging discretionary nature of the plan. Works council notification/consultation obligations apply if subsidiary bears the costs of awards. Also, if subsidiary bears the cost of the awards, prior approval of the subsidiary’s supervisory board or board of directors is required to offer awards to executive officers or directors of the subsidiary. In addition, "performance of functions" agreement A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. © 2017 Baker McKenzie. 33 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy with executive officers or directors of subsidiary receiving equity should reference equity grant, be approved by shareholder of the subsidiary and be signed (in hard copy) by individual. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Czech Republic Cash Award Tax at payment. Taxable amount is fair market value of the award at payment. Generally, yes, provided that subsidiary bears the cost of the award. Written agreement recommended. Income Tax: Withholding and reporting required at the taxable event. Social Insurance Contributions: Social insurance contributions withholding and reporting likely required if awards are paid through local payroll. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Although not entirely clear, it is likely that cashsettled awards paid through local payroll will need to be included in termination indemnities calculations. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") © 2017 Baker McKenzie. 34 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Denmark OPTION Tax on spread at exercise for options. A new tax regime came into effect July 1, 2016 which provides favorable tax treatment for certain qualifying equity awards. Under the new regime, taxation of qualifying options is deferred until the time of sale provided certain requirements are met. Contact Baker McKenzie for more information. Tax on sale. Allowed if subsidiary reimburses parent. Written reimbursement agreement strongly recommended. No deduction allowed for awards granted under the tax-favored regime. Income Tax: Reporting required at taxable event. Special reporting obligations apply to options granted under tax-favored regime. No employer withholding obligation. Social Insurance Contributions: Employee subject to social insurance contributions. No employer withholding required. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. The Danish Stock Option Act, which applies to grants after June 30, 2004 (and seemingly covers grants by U.S. multinationals), permits forfeiture of unvested awards for voluntary terminations, but not for involuntary terminations (with limited exceptions). Thus, terminated employees may have a right to continue to vest in awards (and exercise options until the expiration date) and may be entitled to at least a pro-rated portion of any annual grant made in year of termination. Pursuant to the Stock Option Act, equity awards will not be included when calculating holiday pay upon termination of employment. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and © 2017 Baker McKenzie. 35 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. potential penalties. Denmark ESPP Tax on discount at purchase for ESPP. A new tax regime came into effect July 1, 2016 which provides for favorable tax treatment for certain qualifying equity awards. Under the new regime, taxation of shares acquired under an ESPP would be deferred until the time of sale provided certain requirements are met. Contact Baker McKenzie for more information. Tax on sale. Allowed if subsidiary reimburses parent. Written reimbursement agreement strongly recommended. No deduction allowed for ESPP offered under the tax-favored regime. Income Tax: Reporting required at taxable event. Special reporting obligations apply to ESPP offered under tax-favored regime. No employer withholding obligation. Social Insurance Contributions: Employee subject to social insurance contributions. No employer withholding required. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. None. The Danish Stock Option Act, which applies to grants after June 30, 2004 (and seemingly covers grants by U.S. multinationals), permits forfeiture of awards for voluntary terminations, but not for involuntary terminations (with limited exceptions). Thus, terminated employees may have a right to continue to participate in current ESPP offering period. Pursuant to the Stock Option Act, equity awards will not be included when calculating holiday pay upon termination of employment. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 36 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Denmark RS/RSU Tax at grant for RS. Tax likely at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. It is possible to request a tax ruling confirming timing of taxation of RSUs from Danish tax authorities. A new tax regime came into effect July 1, 2016 which provides for favorable tax treatment for certain qualifying equity awards. Under the new regime, taxation of qualifying RSUs would be deferred until the time of sale provided certain requirements are met. Contact Baker McKenzie for more information. Tax on sale. Allowed if subsidiary reimburses parent. Written reimbursement agreement strongly recommended. No deduction allowed for awards granted under the tax-favored regime. Income Tax: Reporting required at taxable event. Special reporting obligations apply to RSUs granted under tax-favored regime. No withholding obligation. Social Insurance Contributions: Employee subject to social insurance contributions. No employer withholding required. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. The Danish Stock Option Act, which applies to grants after June 30, 2004 (and seemingly covers grants by U.S. multinationals), permits forfeiture of unvested awards for voluntary terminations, but not for involuntary terminations (with limited exceptions). Thus, terminated employees may have a right to retain unvested awards and may be entitled to at least prorated portion of any annual grant made in year of termination. Rules likely apply to RSUs, but not RS. RS likely subject to Danish Salaried Employees Act which does not permit forfeiture of unvested awards for voluntary or involuntary terminations. Pursuant to the Stock Option Act, equity awards will not be included when calculating holiday pay upon termination of employment. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 37 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Denmark Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: Withholding required. Reporting required at taxable event. Social Insurance Contributions: Yes. Both employer and employee contributions due and employer must withhold employee portion. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Cash awards are subject to Danish Salaried Employees Act which does not permit forfeiture of unvested awards for voluntary or involuntary termination. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Egypt OPTION Likely tax on spread at exercise. Likely tax on sale. Likely yes, if subsidiary reimburses the parent. Written agreement strongly recommended. Income Tax: Withholding and reporting generally required. Social Insurance Contributions: If the spread is considered part of the employee’s base None, provided shares subject to the award are not registered on an Egyptian stock exchange. Funds remitted abroad to acquire shares and sale proceeds remitted into Egypt must be transferred through a registered bank in Egypt. Written disclaimer recommended to reduce risk of plan entitlement. Prior written consent from employees to transfer of personal data abroad should be obtained. © 2017 Baker McKenzie. 38 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy salary or differential salary (i.e., incentives, bonus, additional salary, commissions), employee and employer social insurance contributions at purchase (unless contribution ceiling already met). Egypt ESPP Likely tax on discount at purchase. Likely tax on sale. Likely yes, if subsidiary reimburses the parent. Written agreement strongly recommended. Income Tax: Withholding and reporting generally required. Social Insurance Contributions: If the discount is considered part of the employee’s base salary or differential salary (i.e., incentives, bonus, additional salary, commissions), employee and employer social insurance contributions at purchase (unless contribution ceiling already met). None, provided shares subject to the award are not registered on an Egyptian stock exchange. Funds remitted abroad to acquire shares and sale proceeds remitted into Egypt must be transferred through a registered bank in Egypt. Written disclaimer recommended to reduce risk of plan entitlement. Prior written consent from employees to transfer of personal data abroad should be obtained. Egypt RS/RSU Taxed when shares are released to the recipients, free of any restrictions. Taxable amount is the fair market value of the shares when the shares are released to the recipients, free of any restrictions. Likely tax on sale. Likely yes, if subsidiary reimburses the parent. Written agreement strongly recommended. Income Tax: Withholding and reporting generally required. Social Insurance Contributions: If the RS/RSU income is considered part of the employee’s base salary or differential salary (i.e., incentives, bonus, additional salary, None, provided shares subject to the award are not registered on an Egyptian stock exchange. Sale proceeds remitted into Egypt must be transferred through a registered bank in Egypt. Written disclaimer recommended to reduce risk of plan entitlement Prior written consent from employees to transfer of personal data abroad should be obtained. © 2017 Baker McKenzie. 39 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy commissions), employee and employer social insurance contributions will be due, unless contribution ceiling already met. Egypt Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, if subsidiary bears the cost of award. Written agreement recommended. Income Tax: Withholding and reporting required. Social Insurance Contributions: Employee and employer social insurance contributions will be due, unless contribution ceiling already met. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Prior written consent from employees to transfer of personal data abroad should be obtained. Finland OPTION Tax on spread at exercise. Tax on sale, subject to certain exemptions and deductions. Yes, if subsidiary reimburses parent pursuant to a written agreement and grants based on employment relationship. In addition, use of treasury shares may be required. Income Tax: Withholding and reporting required at exercise. Social Insurance Contributions: Generally, only the employee-paid health insurance premium due on spread at exercise and included in general withholding rate, so no additional withholding. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Employees should be required to acknowledge discretionary nature of awards. Even with acknowledgment, award income may be taken into account in determining the amount of compensation for unjustified termination of employment. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, © 2017 Baker McKenzie. 40 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy treatment (e.g., accelerated or continued vesting) for those meeting the criteria. 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Finland ESPP Tax on discount at purchase. For ESPP, may be able to exclude at least a portion of discount from tax if newly issued shares are used and a ruling is obtained. Tax on sale, subject to certain exemptions and deductions. Yes, if subsidiary reimburses parent pursuant to a written agreement and offers based on employment relationship. In addition, use of treasury shares may be required. Income Tax: Withholding and reporting required at purchase. Social Insurance Contributions: Generally, only the employee-paid health insurance premium due on discount at purchase and included in general withholding rate, so no additional withholding. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. None. Employees should be required to acknowledge discretionary nature of awards. Even with acknowledgment, award income may be taken into account in determining the amount of compensation for unjustified termination of employment. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 41 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Finland RS/RSU Tax likely at grant for RS subject to timebased vesting conditions only; tax likely at vesting for RS subject to other vesting conditions (e.g., performance goals). Tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Tax on sale, subject to certain exemptions and deductions. Yes, if subsidiary reimburses parent pursuant to a written agreement and grants based on employment relationship. In addition, use of treasury shares may be required. Income Tax: Withholding and reporting required at taxable event. Social Insurance Contributions: Generally, only the employee-paid health premium due on income at taxable event and included in general withholding rate, so no additional withholding. There is a risk that additional social insurance contributions are due on RS and RSUs which vest within one year from grant. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Employees should be required to acknowledge discretionary nature of awards. Even with acknowledgment, award income may be taken into account as salary in determining the amount of compensation for unjustified termination of employment. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Finland Cash Award Taxed at payment. Taxable amount is amount of the cash award. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: Withholding and reporting required at payment. Social Insurance Contributions: Employer and employee social None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity © 2017 Baker McKenzie. 42 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy insurance contributions are due (as on ordinary salary). Employer must withhold employee contributions. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of cash awards and other incentives in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. France OPTION Tax on spread at exercise. Tax qualification may be available for option grants, resulting in deferral of tax due at exercise until sale for employees as well as elimination of certain employee and employer social security contributions if requirements met. However, there is an employer-paid social tax due at grant of French-qualified options. A sub-plan should be in place at the time of grant, which imposes certain Currently, a deduction is generally allowed only with respect to shares that the parent has repurchased, not newly issued shares, and only with respect to the actual loss sustained; a written reimbursement agreement is recommended. Income Tax: Generally no income tax withholding required for French tax residents. Withholding required for taxable events occurring on or after April 1, 2011 if employee is not a French tax resident but was employed and subject to tax in France over the period an award was earned (usually the vesting period). For French-qualified awards, the entity delivering the No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor reporting requirements may apply. Possibly. Disclaimer is strongly recommended. Increased entitlement risk if grants are regularly made under similar terms over several years. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may © 2017 Baker McKenzie. 43 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy other restrictions such as special closed period which preclude public companies from granting French-qualified options during certain periods. In addition, special reporting requirements apply to French-qualified options. Tax on sale. proceeds at sale to the employee is generally responsible for the withholding; depending on how the plan is administered, the entity responsible for withholding could therefore be the broker. Reporting required. Social Insurance Contributions: Yes (at rates up to approximately 46% for the employer and approximately 23% for the employee) for non- French-qualified options. Employer must withhold the employee contributions for non French-qualified options. Employer social tax applies at grant of French-qualified options. Employee social tax on Frenchqualified options applies at sale, but employer is not required to withhold. particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. France ESPP Tax on discount at purchase. Tax-favored stock purchase plan (P.E.E.) may be considered. Tax on sale. Currently, a deduction is generally allowed only with respect to shares that the parent has repurchased, not newly issued shares, and only with respect to the actual loss sustained; a Income Tax: Generally no income tax withholding required for French tax residents. Withholding required for taxable events occurring on or after April 1, 2011 if employee is not a French tax resident The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Minor reporting requirements may apply. Possibly. Disclaimer is strongly recommended and employees should consent (in French) to payroll deductions. Increased entitlement risk if grants are regularly made under similar terms over several years. Discrimination against part-time employees is A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a © 2017 Baker McKenzie. 44 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy written reimbursement agreement is recommended. but was employed and subject to tax in France over the purchase period. Reporting required. Social Insurance Contributions: Yes (at rates up to approximately 46% for the employer and approximately 23% for the employee). Employer must withhold the employee contributions. Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. France RS/RSU Tax at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Tax qualification is available for RSU, resulting in deferral of tax due at vesting until sale as well as elimination of certain employer and employee social security contributions. However, an employer-paid social tax is due (either at grant or at vesting) and certain minimum vesting and/or holding periods apply. Currently, a deduction is generally allowed only with respect to shares that the parent has repurchased, not newly issued shares, and only with respect to the actual loss sustained; a written reimbursement agreement is recommended. Income Tax: Generally no income tax withholding required for French tax residents. Withholding required for taxable events occurring on or after April 1, 2011 if employee is not a French tax resident but was employed and subject to tax in France over the period an award was earned (usually the vesting period). For French-qualified awards, the entity delivering the proceeds at sale to No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor reporting requirements may apply. Possibly. Disclaimer is strongly recommended. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. © 2017 Baker McKenzie. 45 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy The specific requirements depend on whether the preMacron (pre-August 7, 2015) regime, the Macron (post-August 7, 2015) regime or the “modified Macron” (post-December 30, 2016) regime applies. To rely on the Macron regime, the issuing company’s shareholders must have approved the plan under which the French-qualified RSUs are granted after August 7, 2015. However, the modifiedMacron regime will apply if the issuer’s shareholders approve the plan under which the French-qualified RSUs are granted after December 30, 2016. In any case, a sub-plan must be in place at the time of grant, which imposes certain other restrictions, such as special closed periods which restrict sale of shares of public companies during certain periods. In addition, special reporting requirements apply to Frenchqualified RSUs. Contact Baker McKenzie for more details. Tax on sale. the employee is generally responsible for the withholding; depending on how the plan is administered, the entity responsible for withholding could therefore be the broker. Reporting required. Social Insurance Contributions: Yes (at rates up to approximately 46% for the employer and approximately 23% for the employee) for non- French-qualified RSUs. Employer must withhold the employee contributions for non French-qualified RSUs. Employer social tax applies at grant or vesting of Frenchqualified RSUs depending on whether the pre-Macron regime or the post-Macron or modified-Macron regime applies. Employee social tax on French-qualified RSUs applies at sale, but employer is not required to withhold. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 46 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy France Cash Award Taxed at payment. Taxable amount is the amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement strongly recommended. Income Tax: Generally no income tax withholding required for French tax residents. Reporting required. Social Insurance Contributions: Yes (at rates up to approximately 46% for the employer and approximately 23% for the employee). Employee must withhold the employee contributions. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Cash awards may be viewed as a remuneration item (and, as such, an addendum to the employment contract), which may require that the award agreement be translated into French and which may require consultation with works council (if applicable). Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly provisions with age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Germany OPTION Tax on spread at exercise. Small deduction may apply. Taxable event may be delayed until shares are debited from company’s books after May be available only if costs are considered to relate to business of local subsidiary, which would require local Income Tax: Yes. Social Insurance Contributions: No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, Minor reporting may be required. Possibly. It is advisable to make U.S. law the governing law, minimize the involvement of the local subsidiary and include a written A valid basis is required to collect, process and transfer personal data. Currently, the most common approach © 2017 Baker McKenzie. 47 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy exercise. Tax on sale. subsidiary to be involved in planning, granting and administering SOP and this would significantly increase labor law risks (plan entitlement, works council consultation, etc.). In addition, some German tax authorities take position that costs are not deductible even if above condition is met. Yes, for both employee and employer, unless contribution ceiling already met. Employer must withhold the employee’s contribution. the EU Prospectus Regulation. disclaimer. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most countries, including Germany, have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Germany ESPP Tax on discount at purchase. Small deduction may apply. Taxable event may be delayed until shares are debited from company’s books. Tax on sale. May be available only if costs are considered to relate to business of local subsidiary, which would require local subsidiary to be involved in planning, granting and administering ESPP and this would significantly increase labor law risks (plan entitlement, works council consultation, etc.). Income Tax: Yes. Social Insurance Contributions: Yes, for both employee and employer, unless contribution ceiling already met. Employer must withhold the employee’s contribution. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) Minor reporting may be required. Possibly. It is advisable to make U.S. law the governing law, minimize the involvement of the local subsidiary and include a written disclaimer. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most countries, including Germany, have adopted local rules implementing A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific © 2017 Baker McKenzie. 48 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy In addition, some German tax authorities take position that costs are not deductible even if above condition is met. this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Germany RS/RSU Tax likely at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Small deduction may apply. Taxable event may be delayed until shares are debited from company’s books after grant (RS) / vesting (RSU). Pursuant to a German Federal Tax Court case, in certain circumstances, it may be possible to take the position that RS is taxed on vesting. Companies should obtain a wage tax ruling before relying on this decision. Tax on sale. May be available only if costs are considered to relate to business of local subsidiary, which would require local subsidiary to be involved in planning, granting and administering RS/RSU and this would significantly increase labor law risks (plan entitlement, works council consultation, etc.). In addition, some German tax authorities take position that costs are not deductible even if above condition is met. Income Tax: Yes. Social Insurance Contributions: Yes, for both employee and employer, unless employee's contribution ceiling already met. Employer must withhold the employee’s contribution. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor reporting may be required. Possibly. It is advisable to make U.S. law the governing law, minimize the involvement of the local subsidiary and include a written disclaimer. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, countries, including Germany, have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, © 2017 Baker McKenzie. 49 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Germany Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: Yes. Social Insurance Contributions: Yes, for both employee and employer, unless employee's contribution ceiling already met. Employer must withhold the employee’s contribution. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. It is advisable to make U.S. law the governing law, minimize the involvement of the local subsidiary and include a written disclaimer. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, countries, including Germany, have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 50 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Hong Kong OPTION Tax on spread at exercise. No tax on sale. Generally allowed if subsidiary reimburses parent. Income Tax: No withholding required. Reporting required (for grant and exercise of options). Social Insurance Contributions: No. No, provided certain requirements are met. None. No, if employee acknowledges discretionary nature of plan. Discrimination against part-time employees is problematic if predominantly women. Need to comply with Hong Kong’s Personal Data (Privacy) Ordinance which includes providing notice to employees and obtaining employee consent to collection, use and transfer of data. Hong Kong ESPP Tax on discount at purchase. No tax on sale. Generally allowed if subsidiary reimburses parent. Income Tax: No withholding required. Reporting required. Social Insurance Contributions: No. No, provided certain requirements are met. None. No, if employee acknowledges discretionary nature of plan. Discrimination against part-time employees is problematic if predominantly women. Payroll deductions technically are not permitted. Need to comply with Hong Kong’s Personal Data (Privacy) Ordinance which includes providing notice to employees and obtaining employee consent to collection, use and transfer of data. Hong Kong RS/RSU Tax at vesting likely for RS/RSUs, but may depend on specific award terms. Taxable amount is fair market value of the shares on the tax event. No tax on sale. Generally allowed if subsidiary reimburses parent. Income Tax: No withholding required. Reporting required. Social Insurance Contributions: No. No, provided certain requirements are met. None. No, if employee acknowledges discretionary nature of plan. Discrimination against part-time employees is problematic if predominantly women. ORSO legislation may treat RSU plan as retirement scheme subject to registration/ exemption process if RSUs are paid in cash and if payment made upon termination of employment for certain reasons. Need to comply with Hong Kong’s Personal Data (Privacy) Ordinance which includes providing notice to employees and obtaining employee consent to collection, use and transfer of data. Hong Kong Cash Award Tax at payment. Taxable amount is amount of the cash payment. Generally yes, if subsidiary bears the cost of award. Income Tax: No withholding required. Reporting required. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased Need to comply with Hong Kong’s Personal Data (Privacy) Ordinance which includes © 2017 Baker McKenzie. 51 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Social Insurance Contributions: Employer and employee Mandatory Provident contributions apply, unless contribution ceiling already met. Employer must withhold employee contributions. labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Discrimination against part-time employees is problematic if predominantly women. ORSO legislation may treat cash awards as retirement scheme subject to registration/ exemption process if payment made upon termination of employment for certain reasons. providing notice to employees and obtaining employee consent to collection, use and transfer of data. Hungary OPTION Tax on spread at exercise. Note that the tax base may be reduced if the employee is required to pay health tax contributions (which is likely the case). Tax on sale. May be possible, if reimbursement made. Written reimbursement agreement advisable. Income Tax: No. Social Insurance Contributions: Yes, employee-paid health tax likely due on award income, but employer is not required to withhold. An electronic notification to the Hungarian securities regulator is required within 15 days of the end of the offering period. Contact Baker McKenzie for further details. No other securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Generally no, provided U.S. (or non-Hungarian) law is the governing law. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and © 2017 Baker McKenzie. 52 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Hungary ESPP Tax on discount at purchase. Note that the tax base may be reduced if the employee is required to pay health tax (which is likely the case). Tax on sale. May be possible, if reimbursement made. Written reimbursement agreement advisable. Income Tax: No. Social Insurance Contributions: Yes, employee-paid health tax likely due on award income, but employer is not required to withhold. An electronic notification to the Hungarian securities regulator is required within 15 days of the end of the offering period. Contact Baker McKenzie for further details. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. None. Generally no, provided U.S. (or non-Hungarian) law is the governing law. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. Employees must give special form of written consent to employer for payroll deductions. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 53 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Hungary RS/RSU Tax likely at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the taxable event. Note that the tax base may be reduced if the employee is required to pay health tax (which is likely the case). Tax on sale. May be possible, if reimbursement made. Written reimbursement agreement advisable. Income Tax: No. Social Insurance Contributions: Yes, employee-paid health tax likely due on award income, but employer is not required to withhold. An electronic notification to the Hungarian securities regulator is required within 15 days of the end of the offering period. Contact Baker McKenzie for further details. No other securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulations. None. Generally no, provided U.S. (or non-Hungarian) law is the governing law. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Hungary Cash Award Tax at payment. Taxable amount is amount of the cash payment. Generally yes, if subsidiary bears the cost of award. Written agreement recommended. Income Tax: Withholding and reporting required. Social Insurance Contributions: Yes. Employer and employee contributions due None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity © 2017 Baker McKenzie. 54 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy and employer must withhold employee portion. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of awards in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. India OPTION Tax on spread at exercise (fair market value of the shares must be determined by an Indian merchant bank, unless shares are listed in India). Tax on sale. Allowed if subsidiary reimburses parent. Reimbursement payment may be subject to exchange control restrictions. Cashnetting to effect the reimbursement is not permitted. Income Tax: Yes. Social Insurance Contributions: No. Likely none, but application of Indian securities laws to non-Indian companies issuing equity awards is unclear. Reserve Bank of India (“RBI”) approval required, unless (1) conditions of general permission are met, (2) no cash is remitted out of India (e.g., options are restricted to cashlesssell all method of exercise) or (3) employee’s remittances out of India are within annual limit. If relying on the general permission, employees must use an authorized dealer when funds are remitted to purchase Not generally, provided awards are not part of employment contract. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 55 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy shares and the local entity must submit an annual return to the RBI reporting on the remitted amounts. Repatriation of sale proceeds/dividends is required. India ESPP Tax on discount at purchase (fair market value of the shares must be determined by an Indian merchant bank, unless shares are listed in India). Tax on sale. Allowed if subsidiary reimburses parent. Reimbursement payment may be subject to exchange control restrictions. Cashnetting to effect the reimbursement is not permitted. Income Tax: Yes. Social Insurance Contributions: No. Likely none, but application of Indian securities laws to non-Indian companies issuing equity awards is unclear. Reserve Bank of India (“RBI”) approval required, unless (1) conditions of general permission are met or (2) employee’s remittances out of India are within annual limit. If relying on the general permission, the local entity must use an authorized dealer when funds are remitted to purchase shares and submit an annual return to the RBI reporting on the remitted amounts. Repatriation of sale proceeds/dividends is required. Cash-netting to remit payroll deductions under ESPP is not permitted. Not generally, provided awards are not part of employment contract. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). India RS/RSU Taxation of RS is unclear and depends on rights transferred upon grant. Tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event (as determined by an Indian merchant bank, unless shares are listed in India). Tax on sale. Allowed if subsidiary reimburses parent. Reimbursement payment may be subject to exchange control restrictions. Cashnetting to effect the reimbursement is not permitted. Income Tax: Yes. Social Insurance Contributions: No. Likely none, but application of Indian securities laws to non-Indian companies issuing equity awards is unclear. Likely none because no cash is remitted out of India. Repatriation of sale proceeds/dividends is required. Not generally, provided awards are not part of employment contract. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 56 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy India Cash Award Tax at payment. Taxable amount is amount of the cash payment. Generally yes, if subsidiary bears the cost of award. Written agreement recommended. Income Tax: Yes. Social Insurance Contributions: Likely no, provided award is not part of original employment agreement between employer and employee. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Indonesia OPTION Likely no tax at exercise unless reimbursement/local tax deduction. If reimbursement/local tax deduction, tax on spread at exercise. Tax on sale. Likely allowed if subsidiary reimburses parent under a written reimbursement agreement, award income is treated as cash remuneration and the general requirements of deductibility are satisfied. Income Tax: Likely no, unless subsidiary reimburses parent. Social Insurance Contributions: No, unless subsidiary reimburses parent and the award income is treated as cash remuneration and part of the employees’ base salary. Yes, registration statement must be filed, if options with value greater than IDR1 billion offered in a 12-month period, options are offered to more than 100 persons or shares are purchased by more than 50 persons in Indonesia. It is possible to obtain waiver from registration requirement. Options limited to cashless exercise avoid registration requirement. Foreign exchange activity and statistical reporting requirements apply. Not generally, but disclaimer recommended to reduce risk of equity income being included in termination indemnities. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Indonesia ESPP Likely no tax at purchase unless reimbursement/local tax deduction. If reimbursement/local tax deduction, tax on discount at purchase. Tax on sale. Likely allowed if subsidiary reimburses parent under a written reimbursement agreement, award income is treated as cash remuneration and the general requirements of deductibility are satisfied. Income Tax: Likely no, unless subsidiary reimburses parent. Social Insurance Contributions: No, unless subsidiary reimburses parent and the award income is treated as cash remuneration and part of the employees’ base salary. Yes, registration statement must be filed if shares under ESPP with value greater than IDR1 billion offered in a 12-month period, ESPP offered to more than 100 persons or shares are purchased by more than 50 persons in Indonesia. It is possible to obtain waiver from registration requirement. Foreign exchange activity and statistical reporting requirements apply. Not generally, but disclaimer recommended to reduce risk of equity income being included in termination indemnities. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 57 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Indonesia RS/RSU Tax at grant likely for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Tax on sale. Likely allowed if subsidiary reimburses parent under a written reimbursement agreement, award income is treated as cash remuneration and the general requirements of deductibility are satisfied. Income Tax: Likely no, unless subsidiary reimburses parent. Social Insurance Contributions: No, unless subsidiary reimburses parent and the award income is treated as cash remuneration and part of the employees’ base salary. No, provided no cash consideration paid by employees. Foreign exchange activity and statistical reporting requirements apply. Not generally, but disclaimer recommended to reduce risk of equity income being included in termination indemnities. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Indonesia Cash Award Tax at payment. Taxable amount is amount of the cash payment. Generally yes, provided that subsidiary bears the cost of award. Written agreement recommended. Income Tax: Yes. Social Insurance Contributions: Likely yes, unless it can be argued that awards not part of employee’s regular salary. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Written consent from employees for the transfer of data abroad is strongly recommended. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Ireland OPTION Generally, tax on spread at exercise. Favorable tax treatment for options granted under an approved plan ceased to apply to income arising on or after November 24, 2010. (See ESPP section for information on tax qualified scheme.) Tax on sale, subject to annual exclusion. Generally allowed if subsidiary reimburses parent under a written reimbursement agreement and certain conditions are met. Income Tax: Annual reporting of grant and exercise required for options. Reporting must be completed electronically. Withholding is not required for options. Social Insurance Contributions: Universal Social Charges (“USC”) are due. Employee social insurance contributions (PRSI No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Generally no, but employee should be required to sign/accept an agreement acknowledging the discretionary nature of the grant. Part-time employees likely entitled to pro rata benefits. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification © 2017 Baker McKenzie. 58 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy charges) are due. Employer is not required to withhold PRSI or USC on options. Employer PRSI does not apply. plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Ireland ESPP Generally, tax on discount at purchase. Tax qualification available for certain share scheme (e.g., SAYE) which defers income tax until sale, provided certain conditions are met. However, employee social insurance contributions are due on any benefit realized at purchase under such a scheme. Tax on sale, subject to annual exclusion. Generally allowed if subsidiary reimburses parent under a written reimbursement agreement and certain conditions are met. Income Tax: Annual reporting of grant and purchase required for ESPP if ESPP is treated as an “option” for purposes of Irish tax law which is generally the case. Reporting must be completed electronically. Withholding will generally not apply assuming the ESPP is treated as an "option" for purposes of Irish tax law. Social Insurance Contributions: Universal Social Charges (“USC”) are due on all equity award income. Employee social insurance contributions (PRSI charges) are due on all equity award income. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. None. Generally no, but employee should be required to sign/accept an agreement acknowledging the discretionary nature of the grant. Part-time employees likely entitled to pro rata benefits. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in © 2017 Baker McKenzie. 59 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Obligation to withhold PRSI and USC will generally not apply assuming the ESPP is treated as an "option" for purposes of Irish tax law. Employer PRSI does not apply. advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Ireland RS/RSU Tax at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. RS taxable amount at grant may be reduced depending on the vesting provisions. Tax on sale, subject to annual exclusion. Generally allowed if subsidiary reimburses parent under a written reimbursement agreement and certain conditions are met. Income Tax: Reporting through PAYE system at grant for RS/vesting for RSUs. Annual reporting specific to equity awards is no longer required. Withholding required. Social Insurance Contributions: Universal Social Charges (“USC”) are due. Employee social insurance contributions (PRSI charges) are due. Employer is required to withhold USC and employee PRSI due on RS/RSU. Employer PRSI does not apply. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Generally no, but employee should be required to sign/accept an agreement acknowledging the discretionary nature of the grant. Part-time employees likely entitled to pro rata benefits. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 60 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Ireland Cash Award Taxed at payment. Taxable amount is amount of cash payment. Generally allowed if subsidiary reimburses parent under a written reimbursement agreement and certain conditions are met. Income Tax: Yes. Social Insurance Contributions: Universal Social Charges (“USC”) are due. Employee and employer social insurance contributions (PRSI charges) are due. Employer is required to withhold USC and employee PRSI due. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Part-time employees likely entitled to pro-rata benefits. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of cash awards and other incentives in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continue vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Israel OPTION Generally, tax on sale, both for awards granted under nontrustee plan and under an approved (Section 102) trustee plan. Under a non-trustee plan, employees are taxed at marginal rates May be allowed with an approved trustee plan if subsidiary reimburses parent under written reimbursement agreement. In such case, deduction is limited to the lesser of: (1) the Income Tax: Reporting and withholding at taxable event for nontrustee plans. Trustee is required to withhold and report at sale for approved trustee plan. In addition, an annual Prospectus and reporting requirements apply if grants are made to more than 35 employees. The securities authorities are likely to grant an exemption under certain circumstances. None. Generally no, but disclaimer is recommended. Register databases with personal information pursuant to the Protection of Privacy Law of 1981. Employees’ written consent to the collection, use and transfer of data is © 2017 Baker McKenzie. 61 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy on sale proceeds (minus exercise price). Under an approved trustee plan, the employer may elect either the income method or the capital gain method. Under the income method, employees are taxed at marginal rates on sale proceeds (minus exercise price). Under the capital gain method, employees are taxed at marginal rates on the difference between exercise price and market value of shares at grant and the remainder is taxed at capital gains rate. Special deposit and lock up periods apply to trustee plans. Taxable fair market value is calculated as the 30-day average price prior to the date of determination. reimbursement amount and (2) the portion of employee’s gain that is taxed as ordinary income at marginal rates, i.e., the entire gain under the income method and a portion of the gain under the capital gain method - see Taxation of Employee section for further details. Generally not available with a non-trustee plan. report of stock plan activity generally must be filed but filing obligation has been suspended. Social Insurance Contributions: Yes, employee and employer contributions due on non-trustee plans and on ordinary income portion under trustee plans (i.e., amount taxed at marginal rates), provided wage base is not exceeded. Employer/trustee has to withhold employee’s contributions. recommended. Israel ESPP Generally, tax on sale, both for awards granted under nontrustee plan and under an approved (Section 102) trustee plan. Under a non-trustee plan, employees are taxed at marginal rates on sale proceeds (minus purchase price). It may be possible to apply for a tax ruling providing for the taxable event to be at purchase rather than sale. In this case, May be allowed with an approved trustee plan if subsidiary reimburses parent under written reimbursement agreement. In such case, deduction is limited to the lesser of: (1 ) the reimbursement amount and (2) the portion of employee’s gain that is taxed as ordinary income, i.e., the entire gain under the income Income Tax: Reporting and withholding at taxable event for nontrustee plans. Trustee is required to withhold and report at sale for approved trustee plan. In addition, an annual report of stock plan activity generally must be filed but filing obligation has been suspended. Prospectus and reporting requirements apply if grants are made to more than 35 employees. The securities authorities are likely to grant an exemption under certain circumstances. None. Generally no, but disclaimer is recommended. Register databases with personal information pursuant to the Protection of Privacy Law of 1981. Employees’ written consent to the collection, use and transfer of data is recommended. © 2017 Baker McKenzie. 62 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy marginal rates would apply to difference between purchase price and fair market value of shares at purchase, while capital gains tax rate would apply to any increase in value of shares between purchase and sale. Under an approved trustee plan, the employer may elect either the income method or the capital gain method. Under the income method, employees are taxed at marginal rates on sale proceeds minus purchase price. Under the capital gain method, employees are taxed at marginal rates on the difference between purchase price and market value of shares at purchase and the remainder is taxed at capital gains rate. Special deposit and lock up periods apply to trustee plans. Taxable fair market value is calculated as the 30-day average price prior to the date of determination. Note that the Israeli tax authorities have recently indicated that they will offer two “green track” rulings for ESPP which provide a simplified process for obtaining the tax treatment explained above. method and a portion of the gain under the capital gain method - see Taxation of Employee section for further details. Generally not available with a non-trustee plan. Social Insurance Contributions: Yes, employee and employer contributions due on non-trustee plans and on ordinary income portion under trustee plans (i.e., amount taxed at marginal rates), provided wage base is not exceeded. Employer/trustee has to withhold employee’s contributions. © 2017 Baker McKenzie. 63 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Israel RS/RSU If awards granted under a non-trustee plan (i.e., not granted under and approved (Section 102) trustee plan), tax at grant for RS; tax at sale for RSU. Taxable amount is fair market value of the shares on the tax event. If awards granted under an approved (Section 102) trustee plan, taxed at sale for RS/RSU. Taxable amount is the fair market value of the share on the tax event. Under a non-trustee plan, employees are taxed at marginal rates on the tax event. In the case of RSU, it may be possible to apply for a ruling providing for the taxable event to be at vesting rather than sale. In this case, marginal rates would apply to fair market value of shares at vesting while capital gains tax rate would apply to any increase in value of shares between vesting and sale. Under an approved trustee plan, the employer may elect either the income method or the capital gain method. Under the income method, employees are taxed at marginal rates on sale proceeds. Under the capital gain method, employees are taxed at May be allowed with an approved trustee plan if subsidiary reimburses parent under written reimbursement agreement. In such case, deduction is limited to the lesser of: (1 ) the reimbursement amount and (2) the portion of employee’s gain that is taxed as ordinary income at marginal rates, i.e., the entire gain under the income method and a portion of the gain under the capital gain method - see Taxation of Employee section for further details. Generally not available with a non-trustee plan. Income Tax: Reporting and withholding at taxable event for nontrustee plans. Trustee is required to withhold and report at sale for approved trustee plan. In addition, an annual report of stock plan activity generally must be filed but filing obligation has been suspended. Social Insurance Contributions: Yes, employee and employer contributions due on non-trustee plans and on ordinary income portion under trustee plans (i.e., amount taxed at marginal rates), provided wage base is not exceeded. Employer/trustee has to withhold employee’s contributions. Prospectus and reporting requirements apply if grants are made to more than 35 employees. The securities authorities are likely to grant an exemption under certain circumstances. None. Generally no, but disclaimer is recommended. Register databases with personal information pursuant to the Protection of Privacy Law of 1981. Employees’ written consent to the collection, use and transfer of data is recommended. © 2017 Baker McKenzie. 64 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy marginal tax rates on the market value of the underlying shares at grant and at capital gains tax rate on the additional gain at sale. Special deposit and lock up periods apply to trustee plans. Taxable fair market value is calculated as the 30-day average price prior to the date of determination. Israel Cash Award Tax on the amount of cash payment at the time of payment. Generally yes, provided that subsidiary bears the cost of award. Written agreement recommended. Income Tax: Withholding required. Social Insurance Contributions: Yes. Employer and employee contributions due and employer must withhold employee portion. None. None. Generally no, but awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Written disclaimer should be included in grant documents to reduce risk of entitlement. Register databases with personal information pursuant to the Protection of Privacy Law of 1981. Employees’ written consent to the collection, use and transfer of data is recommended. Italy OPTION Tax at exercise on spread. Annual exemption may apply to first €2,065 of spread if shares held three years from date of exercise and certain other requirements met. Tax on sale. A Foreign Financial Asset Tax may be assessed on the value of shares held outside of Italy. Under Italian tax law, Allowed if subsidiary reimburses parent under a written agreement. The deduction may be limited to accounting expense of award based upon OECD guidelines on transfer pricing and may increase labor risks. Income Tax: Withholding and reporting required, unless income is exempt from tax (based on €2,065 exemption). Social Insurance Contributions: Social insurance contributions do not apply. Italian financial intermediary is generally required regardless of number of offerees (exception for (i) offers made in person/hard-copy or (ii) options subject to cashless sell-all method of exercise). No other securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor reporting requirements may apply for employees. Possible entitlement issues. Although the risks may be reduced if employees acknowledge discretionary nature of plan and that award income is excluded from salary, a Milan labor court has ruled that income from a stock option exercise is employment compensation. Employees should also expressly agree to accept certain non-negotiated terms of the award. Discrimination against part-time employees is A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. © 2017 Baker McKenzie. 65 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy the fair market value of the shares is calculated based on the one-month average price prior to the date of determination. generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries (including Italy) have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Italy ESPP Tax at purchase on discount. Annual exemption may apply to first €2,065 of discount if shares held three years from date of purchase and certain other requirements met. Tax on sale. A Foreign Financial Asset Tax may be assessed on the value of shares held outside of Italy. Under Italian tax law, the fair market value of the shares is calculated based on the one-month average price prior to the date of determination. Allowed if subsidiary reimburses parent under a written agreement. The deduction may be limited to accounting expense of award based upon OECD guidelines on transfer pricing and may increase labor risks. Income Tax: Withholding and reporting required, unless income is exempt from tax (based on €2,065 exemption). Social Insurance Contributions: Employee and employer social insurance contributions apply (to the extent applicable wage ceiling not already met), unless €2,065 exemption applies to income. If applicable, employer must withhold employee’s contributions. Italian financial intermediary is generally required regardless of number of offerees (exceptions for offers made in person/hardcopy). The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, Minor reporting requirements may apply for employees. Possible entitlement issues. Although the risks may be reduced if employees acknowledge discretionary nature of plan and that award income is excluded from salary, a Milan labor court has ruled that income from a stock option exercise is employment compensation. Employees should also expressly agree to accept certain non-negotiated terms of the award. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries (including Italy) have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and © 2017 Baker McKenzie. 66 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Italy RS/RSU Tax at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Annual exemption may apply to first €2,065 of taxable amount if shares held three years from date of grant (RS) or vesting (RSU) and certain other requirements are met. Tax on sale. A Foreign Financial Asset Tax may be assessed on the value of shares held outside of Italy. Under Italian tax law, the fair market value of the shares is calculated based on the one-month average price prior to the date of determination. Allowed if subsidiary reimburses parent under a written agreement. The deduction may be limited to accounting expense of award based upon OECD guidelines on transfer pricing and may increase labor risks. Income Tax: Withholding and reporting required, unless income is exempt from tax (based on €2,065 exemption). Social Insurance Contributions: Employee and employer social insurance contributions apply (to the extent applicable wage ceiling not already met), unless (i) €2,065 exemption applies to income or (ii) RS/RSU not granted to generality of employees and are subject to vesting conditions. If applicable, employer must withhold employee’s contributions. Financial intermediary requirement does not apply to RS/RSUs. No securities law restrictions or obligation apply. Non-transferable free offers of RS/RSUs are not considered "transferable services" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor reporting requirements may apply for employees. Possible entitlement issues. Although the risks may be reduced if employees acknowledge discretionary nature of plan and that award income is excluded from salary, a Milan labor court has ruled that income from a stock option exercise is employment compensation. Employees should also expressly agree to accept certain non-negotiated terms of the award. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries (including Italy) have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 67 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Italy Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, provided the subsidiary bears the cost of the award. Written agreement recommended. Income Tax: Withholding and reporting required. Social Insurance Contributions: Employee and employer social insurance contributions apply to the cash payment (to the extent applicable wage ceiling not already met). If applicable, employer must withhold employee’s contributions. None. Minor reporting requirements may apply for employees. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. However, employees should be required to acknowledge discretionary nature of plan and that award income is excluded from salary. Employees should also expressly agree to accept certain non-negotiated terms of the award. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries (including Italy) have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Japan OPTION Tax on spread at exercise, likely as salary (remuneration) income. Tax authorities are challenging employees Likely available if (i) reimbursement is made pursuant to a written reimbursement agreement, (ii) the Income Tax: Generally no withholding, unless the subsidiary is significantly involved Yes, depending on value and size of offering. However, regardless of value and size of offering, companies making grants solely to employees of a direct and wholly-owned sub, or a wholly-owned second tier sub Employee must notify Ministry of Finance of share purchases in excess of ¥30,000,000. An additional notification Generally, no, if right to terminate plan is reserved in writing. Employee’s consent to the collection, use and transfer of data is recommended. © 2017 Baker McKenzie. 68 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy who claim option income as occasional income, which is taxable at a lower effective rate. Tax on sale. award income is classified as remuneration income, and (iii) amount reimbursed is determined in accordance with general accounting conventions. However, no deduction is available for awards granted to officers or directors of the local entity. in operation of plan and delivery of payment to employees. Annual reporting required (assuming local entity is at least 50% owned by issuer and that no withholding is required). Social Insurance Contributions: Generally, no. classified as a KK are not required to make any securities filings or to prepare a company information statement. If the exemption does not apply, grants to 50 or more offerees in excess of ¥100,000,000 require an extensive filing in addition to ongoing filings; grants to 50 or more offerees between ¥10,000,000 and ¥100,000,000 also require (less extensive) filing. Aggregation rules apply (12-month aggregation rule applies to the value threshold; 6- month aggregation rule applies to the 50 offeree threshold). Cashless exercise restriction does not avoid securities requirements for options. is required for purchase of shares with a value in excess of ¥100,000,000. Japan ESPP Tax on discount at purchase, likely as salary (remuneration) income. Tax authorities are challenging employees who claim ESPP income as occasional income, which is taxable at a lower effective rate. Tax on sale. Likely available if (i) reimbursement is made pursuant to a written reimbursement agreement, (ii) the award income is classified as remuneration income, and (iii) amount reimbursed is determined in accordance with general accounting conventions. However, no deduction is available for awards granted to officers or directors of the local entity. Income Tax: Generally no withholding, unless the subsidiary is significantly involved in operation of plan and delivery of payment to employees. Annual reporting required (assuming local entity is at least 50% owned by issuer and that no withholding is required). Social Insurance Contributions: Generally, no. Yes, depending on value and size of offering. However, regardless of value and size of offering, companies making grants solely to employees of a direct and wholly-owned sub, or a wholly-owned second tier sub classified as a KK are not required to make any securities filings or to prepare a company information statement. If the exemption does not apply, grants to 50 or more offerees in excess of ¥100,000,000 require an extensive filing in addition to ongoing filings; grants to 50 or more offerees between ¥10,000,000 and ¥100,000,000 also require (less extensive) filing. Aggregation rules apply (12-month aggregation rule applies to the value threshold; 6- month aggregation rule applies to the 50 offeree threshold). Forced sale restriction does not avoid securities requirements for ESPP. Employee must notify Ministry of Finance of share purchases in excess of ¥30,000,000. (The local entity may be required to fulfill this notification requirement since it is the entity transferring the payroll deductions to the issuer.) An additional notification is required for purchase of shares with a value in excess of ¥100,000,000. Generally, no, if right to terminate plan is reserved in writing. *An agreement between an employee representative and the local entity must be signed for payroll deductions to be permitted under an ESPP. Separate account should be established unless deductions immediately remitted to parent/broker. Employee’s consent to the collection, use and transfer of data is recommended. Japan RS/RSU Likely tax at vesting. However, in the case of RS tax consequences are uncertain and tax at grant is possible if RS carries voting/dividend rights. Taxable amount is fair market value of the shares on the tax Likely available if (i) reimbursement is made pursuant to a written reimbursement agreement, (ii) the award income is classified as remuneration income, and Income Tax: Generally no withholding, unless the subsidiary is significantly involved in operation of plan and delivery of payment to employees. Generally, none. None. Generally, no, if right to terminate plan is reserved in writing. Employee’s consent to the collection, use and transfer of data is recommended. © 2017 Baker McKenzie. 69 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy event. RS/RSU income likely classified as salary (remuneration) income. Tax authorities are challenging employees who claim RS/RSU income as occasional income, which is taxable at a lower effective rate. Tax on sale. (iii) amount reimbursed is determined in accordance with general accounting conventions. However, for RSU, no deduction is available for awards granted to officers or directors of the local entity; for RS, deduction is only available for awards granted to officers and directors under certain conditions. Annual reporting required (assuming local entity is at least 50% owned by issuer and assuming no withholding is required). Social Insurance Contributions: Generally, no. Japan Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, provided that subsidiary bears cost of award. Written agreement recommended. However, it may not be possible to take a deduction for awards granted to officers or directors of the local entity. Income Tax: Generally yes, based on the local subsidiary being involved in the payment through local payroll. No separate reporting required, assuming withholding is done. Social Insurance Contributions: Potentially, if the cash payment is considered part of the employee’s wage base for social insurance purposes. If applicable, employee and employer contributions apply and the employer must withhold employee’s portion. None. None. Generally, no, if right to terminate plan is reserved in writing. However, awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks. Employee’s consent to the collection, use and transfer of data is recommended. © 2017 Baker McKenzie. 70 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Korea OPTION Tax on spread at exercise. Tax on sale, subject to an exclusion. Yes, if reimbursement made by subsidiary to the parent and certain other conditions satisfied. Exchange control restrictions may impact ability to implement reimbursement arrangement. Income Tax: Generally no, provided subsidiary does not reimburse parent. Social Insurance Contributions: Yes, employee and employer social insurance contributions apply. Employer technically required to withhold employee contributions. Generally, no, as employee exemption should apply. Remittance of funds to purchase shares must be “confirmed” by a Korean foreign exchange bank if funds wired abroad. Please contact Baker McKenzie for more details. Written disclaimer should be included in grant documents to reduce risk of entitlement. Equity income likely will constitute “wages,” particularly if there is reimbursement. Personal Information Protection Act in effect. Written consent from employees for the collection, use and transfer of data abroad is required and specific data and recipients must be named. Korea ESPP Tax on discount at purchase. Tax on sale, subject to an exclusion. Yes, if reimbursement made by subsidiary to the parent and certain other conditions satisfied. Exchange control restrictions may impact ability to implement reimbursement arrangement. Please contact Baker McKenzie for more details. Income Tax: Generally no, provided subsidiary does not reimburse parent. Social Insurance Contributions: Yes, employee and employer social insurance contributions apply. Employer technically required to withhold employee contributions. Generally, no, as employee exemption should apply. Remittance of funds to purchase shares must be “confirmed” by a Korean foreign exchange bank if funds wired abroad. If intercompany offset used to effect purchase of shares, the local entity must report the intercompany offset to the foreign exchange bank at the time of offset. Please contact Baker McKenzie for more details. Written disclaimer should be included in grant documents to reduce risk of entitlement. Equity income likely will constitute “wages,” particularly if there is reimbursement. Co-mingling of payroll deductions with general corporate funds is not permitted, so a separate bank account is recommended. Personal Information Protection Act in effect. Written consent from employees for the collection, use and transfer of data abroad is required and specific data and recipients must be named. Korea RS/RSU 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, subject to an exclusion. Yes, if reimbursement made and certain other conditions satisfied. Exchange control restrictions may impact ability to implement reimbursement arrangement. Please contact Income Tax: Generally no, provided sub does not reimburse parent. Social Insurance Contributions: Yes, employee and employer social insurance contributions apply. Generally, no, as employee exemption should apply. None. Written disclaimer should be included in grant documents to reduce risk of entitlement. Equity income likely will constitute “wages,” particularly if there is reimbursement. Personal Information Protection Act in effect. Written consent from employees for the collection, use and transfer of data abroad is required and specific data and recipients must be named. © 2017 Baker McKenzie. 71 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Baker McKenzie for more details. Employer technically required to withhold employee contributions. Korea Cash Award Tax on the amount of cash payment at the time of payment. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: Withholding required. Social Insurance Contributions: Yes, employee and employer social insurance contributions apply. Employer must withhold employee portion. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Written disclaimer should be included in grant documents to reduce risk of entitlement. The cash payment will constitute “wages.” Personal Information Protection Act in effect. Written consent from employees for the collection, use and transfer of data abroad is required and specific data and recipients must be named. Malaysia OPTION Tax due on the lower of (1) the difference between exercise price and fair market value of the shares at vesting, and (2) difference between exercise price and fair market value of shares at exercise, but tax will be payable only at exercise. No tax on sale unless employee is in business of buying and selling securities and the gains are remitted to Malaysia. *For Malaysian tax purposes, the fair market value of the stock is the average of the high and low price of the stock on a given date. For options granted Generally yes, if subsidiary reimburses parent for costs associated with plan. However, such deduction is not available for newly issued shares. Subsidiary may not reimburse for costs allocated to awards made to directors, unless director receives award in his/her capacity as an employee. Written agreement recommended. Income Tax: Subsidiary required to notify Inland Revenue Board of each grant. Subsidiary also has to report all taxable events on an annual basis on a prescribed form. Withholding required unless employee elects in writing to pay income tax on his/her own. Social Insurance Contributions: Generally, no. Filing of Information Memorandum with Malaysian Securities Commission required within seven days of each distribution of grant materials to employees in Malaysia. Filing must contain all of the grant materials distributed to employees in Malaysia. None. No, provided employee is not contractually entitled to the grant. Personal Data Protection Act was adopted by Parliament in June 2010 and is effective as of November 2013. Employees’ written consent for collection, use and transfer of their data is required under the Act and consent language should be provided in local language. © 2017 Baker McKenzie. 72 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy prior to January 1, 2006, employee may elect to be taxed under old rules (i.e., tax on the discount at grant using average between high and low price, but tax due at exercise). Malaysia ESPP Tax on the discount at purchase. No tax on sale unless employee is in business of buying and selling securities. *For Malaysian tax purposes, the fair market value of the stock is the average of the high and low price of the stock on a given date. Generally yes, if subsidiary reimburses parent for costs associated with plan. However, such deduction is not available for newly issued shares. Subsidiary may not reimburse for costs allocated to awards made to directors, unless director receives award in his/her capacity as an employee. Written agreement recommended. Income Tax: Subsidiary required to notify Inland Revenue Board of each grant. Subsidiary also has to report all taxable events on an annual basis on a prescribed form. Withholding will be required unless employee elects in writing to pay income tax on his/her own. Social Insurance Contributions: Generally, no. Filing of Information Memorandum with Malaysian Securities Commission required within seven days of each distribution of grant materials to employees in Malaysia. Filing must contain all of the grant materials distributed to employees in Malaysia. None. No, provided employee is not contractually entitled to the grant. *For employees whose wages do not exceed MYR2,000 per month or who engage in manual labor or the transport of vehicles, payroll deductions under ESPP generally must be approved by the DirectorGeneral of Labour. In at least one Malaysian state, obtaining the employees’ consent for payroll deductions may be sufficient. Personal Data Protection Act was adopted by Parliament in June 2010 and is effective as of November 2013. Employees’ written consent for collection, use and transfer of their data is required under the Act and consent language should be provided in local language. Malaysia RS/RSU RS/RSUs likely taxed at vesting. Taxable amount is fair market value of the shares on the tax event. No tax on sale unless employee is in business of buying and selling securities. *For Malaysian tax purposes, the fair market value of the stock is the average of the high and low price of the stock on a given date. Generally yes, if subsidiary reimburses parent for costs associated with plan. However, such deduction is not available for newly issued shares. Subsidiary may not reimburse for costs allocated to awards made to directors, unless director receives award in his/her capacity as an employee. Written agreement recommended. Income Tax: Subsidiary required to notify Inland Revenue Board of each grant. Subsidiary also has to report all taxable events on an annual basis on a prescribed form. Withholding will be required unless employee elects in writing to pay income tax on his/her own. Social Insurance Contributions: Generally, no. Filing of Information Memorandum with Malaysian Securities Commission required within seven days of each distribution of grant materials to employees in Malaysia. Filing must contain all of the grant materials distributed to employees in Malaysia. None. No, provided employee is not contractually entitled to the grant. Personal Data Protection Act was adopted by Parliament in June 2010 and is effective as of November 2013. Employees’ written consent for collection, use and transfer of their data is required under the Act and consent language should be provided in local language. © 2017 Baker McKenzie. 73 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Malaysia Cash Award Taxable event likely will be at vesting. The taxable amount will be the fair market value of the underlying shares at vesting. Generally yes, because subsidiary bears the cost of award. Subsidiary may not reimburse for costs allocated to awards made to directors, unless director receives award in his/her capacity as an employee. Written agreement recommended. Income Tax: Subsidiary required to notify Inland Revenue Board of each grant. Subsidiary also has to report all taxable events on an annual basis on a prescribed form. Withholding will be required unless employee elects in writing to pay income tax on his/her own. Social Insurance Contributions: Employee Provident Fund and Social Security Organization contributions may apply to cash payment, depending on specific details of cash award and whether it falls within the definition of wages for these purposes. It is arguable whether the securities filing requirement that applies to stock-settled awards also applies to cash-settled awards. If applicable, filing of Information Memorandum with Malaysian Securities Commission required within seven days of each distribution of grant materials to employees in Malaysia. Filing must contain all of the grant materials distributed to employees in Malaysia. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. In Malaysia, entitlement risk is low, provided employee is not contractually entitled to the grant and disclaimer language is included in grant documents. Personal Data Protection Act was adopted by Parliament in June 2010 and is effective as of November 2013. Employees’ written consent for collection, use and transfer of their data is required under the Act and consent language should be provided in local language. Mexico OPTION Tax on spread at exercise. Tax on sale. Yes, if subsidiary reimburses parent. Written reimbursement agreement required. Income Tax: Reporting and withholding if reimbursement by subsidiary to the parent. Social Insurance Contributions: Probably, if reimbursement is made; however, it is likely the social insurance ceiling will have already been met. None. None. Possible plan entitlement issues, especially if subsidiary reimburses parent and/or options granted on regular basis. Written disclaimer should be included (in English and Spanish) to reduce risk of entitlement. Federal privacy law enacted in July 2010 requires employers to appoint an individual or establish a data privacy department, inform employees of collection of personal data and obtain consent to processing, disclosure and transfer of personal data. © 2017 Baker McKenzie. 74 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Mexico ESPP Tax on discount at purchase. Tax on sale. Yes, if subsidiary reimburses parent. Written reimbursement agreement required. Income Tax: Reporting and withholding if reimbursement by subsidiary to the parent. Social Insurance Contributions: Probably, if reimbursement is made; however, it is likely the social insurance ceiling will have already been met. None. None. Possible plan entitlement issues, especially if subsidiary reimburses parent. Written disclaimer should be included (in English and Spanish) to reduce risk of entitlement. Federal privacy law enacted in July 2010 requires employers to appoint an individual or establish a data privacy department, inform employees of collection of personal data and obtain consent to processing, disclosure and transfer of personal data. Mexico RS/RSU Timing of taxation of RS is unclear as between grant and vesting due to lack of specific guidance and may depend on ownership rights at grant. Tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Tax on sale. Yes, if subsidiary reimburses parent. Written reimbursement agreement required. Income Tax: Reporting and withholding if reimbursement by subsidiary to the parent. Social Insurance Contributions: Probably, if reimbursement is made; however, it is likely the social insurance ceiling will have already been met. None. None. Possible plan entitlement issues, especially if subsidiary reimburses parent and/or RS/RSUs granted on regular basis. Written disclaimer should be included (in English and Spanish) to reduce risk of entitlement. Federal privacy law enacted in July 2010 requires employers to appoint an individual or establish a data privacy department, inform employees of collection of personal data and obtain consent to processing, disclosure and transfer of personal data. Mexico Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Yes, if subsidiary reimburses parent. Written reimbursement agreement required. Income Tax: Reporting and withholding required. Social Insurance Contributions: Yes, employee and employer social insurance contributions likely due; however, it is likely the social None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. In addition, the risk of plan entitlement issues Federal privacy law enacted in July 2010 requires employers to appoint an individual or establish a data privacy department, inform employees of collection of personal data and obtain consent to processing, disclosure and © 2017 Baker McKenzie. 75 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy insurance ceiling will have already been met. increases if awards are granted on regular basis. Written disclaimer should be included (in English and Spanish) to reduce risk of entitlement. transfer of personal data. Morocco OPTION Income tax on the spread at exercise. Tax on the date that sales proceeds are repatriated to Morocco. Please see “Exchange Controls” section. Deduction available if the subsidiary reimburses the parent for the options. Prior approval of the exchange control authorities is required for reimbursement payments. Income Tax: Withholding and reporting required. The employer must submit an annual statement detailing all options granted and shares issued to employees to the tax authorities with declaration of salaries. Social Insurance Contribution: Withholding required. None, provided the underlying shares are not traded on the Moroccan Securities Exchange. Companies may grant equity awards without approval from the exchange control authorities (Office des Changes or "OdC") to employees of Moroccan subsidiaries in which they have more than a 50% direct or indirect interest. Absent an exemption from the OdC, the value of the options granted to employees cannot exceed 10% of the employee’s net annual remuneration. Sale proceeds and dividends must be repatriated to Morocco within 30 days. Subsidiary must report repatriation to OdC on an annual and semi annual basis. Written disclaimer recommended to reduce risk of plan entitlement. Employee’s written consent to the transfer of personal data abroad is required. In addition, a declaration must be filed with the National Commission for Data Protection, or prior authorization is required if sensitive data is being collected and used in connection with the options. Morocco ESPP Tax on the discount at purchase. Tax on the date that sales proceeds are repatriated to Morocco. Please see “Exchange Controls” section. Deduction available if the subsidiary reimburses the parent for the plan. Prior approval of the exchange control authorities is required for reimbursement payments. Income Tax: Withholding and reporting required. The employer must submit an annual statement detailing all purchase rights granted and shares issued to employees to the tax authorities with declaration of Likely none, provided the underlying shares are not traded on the Moroccan Securities Exchange and provided that the Moroccan Securities Commission agrees that the offer of purchase rights under an ESPP is eligible for the exemption from the prospectus requirement applicable to non-transferable stock options for which the employee does not pay anything at grant. We recommend confirming the availability of the Companies may grant equity awards without approval from the exchange control authorities (Office des Changes or "OdC") to employees of Moroccan subsidiaries in which they have more than a 50% direct or indirect interest. Written disclaimer recommended to reduce risk of plan entitlement. Employee’s written consent to the transfer of personal data abroad is required. In addition, a declaration must be filed with the National Commission for Data Protection, or prior authorization is required if sensitive data is being © 2017 Baker McKenzie. 76 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy salaries. Social Insurance Contribution: Withholding required. exemption prior to offering the ESPP in Morocco given inconsistent advice across advisors in this regard. Absent an exemption from the OdC, the value of the purchase right cannot exceed 10% of the employee’s net annual remuneration. Sale proceeds and dividends must be repatriated to Morocco within 30 days. Subsidiary must report repatriation to OdC on an annual and semi annual basis. collected and used in connection with the ESPP. Morocco RS/RSU Income tax on the fair market value of the shares at vesting. Tax on the date sales proceeds are repatriated to Morocco. Deduction available if the subsidiary reimburses the parent for the RS/RSUs. Prior approval of the exchange control authorities is required for reimbursement payments. Income Tax: Withholding and reporting required. Social Insurance Contribution: Withholding required. None, provided the underlying shares are not traded on the Moroccan Securities Exchange. Companies may grant equity awards without approval from the exchange control authorities (Office des Changes or "OdC") to employees of Moroccan subsidiaries in which they have more than a 50% direct or indirect interest. The 10% of employee's annual net remuneration restriction which applies to options no longer applies to RS/RSUs provided the employee does not pay any amounts to receive the shares. Sale proceeds and dividends must be repatriated to Morocco within 30 days. Subsidiary must report repatriation to OdC on an annual and semi annual basis. Written disclaimer recommended to reduce risk of plan entitlement. Employee’s written consent to the transfer of personal data outside Morocco must be obtained. In addition, if not already completed for employment data collection, either a prior authorization must be obtained from, or a declaration must be filed with, the National Commission for Data Protection, depending on the type of data to be collected and used in connection with the RS/RSUs. © 2017 Baker McKenzie. 77 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Morocco Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Deduction available if the subsidiary reimburses the parent for the awards. Prior approval of the exchange control authorities is required for reimbursement payments. Income Tax: Withholding and reporting required. Social Insurance Contribution: Withholding required. None. None. Written disclaimer recommended to reduce risk of plan entitlement. Employee’s written consent to the transfer of personal data abroad is required. In addition, a declaration must be filed with the National Commission for Data Protection, or prior authorization is required if sensitive data is being collected and used in connection with the options. Netherlands OPTION Tax on spread at exercise. No tax on sale provided employee does not hold a substantial interest (5%) in company’s stock. Annual investment yield tax on value of all assets (including shares) in excess of exemption. No, the availability of a corporate tax deduction for stock-based compensation was eliminated effective January 1, 2007. Income Tax: Withholding and reporting required. Social Insurance Contributions: Yes, employee and employer contributions due to the extent applicable wage ceiling not met. If applicable, employer must withhold employee’s portion of social insurance contributions. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Possible plan entitlement issues. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the plan. It is advisable to get works council to agree in writing that plan is not an employment condition; otherwise, works council approval may be required to implement or terminate plan and courts may consider plan benefits in calculating severance award. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most countries, including the Netherlands, have adopted local rules implementing this Directive, which may have an impact on design of A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such © 2017 Baker McKenzie. 78 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Netherlands ESPP Generally, tax on discount at purchase for ESPP. No tax on sale provided employee does not hold a substantial interest (5%) in company’s stock. Annual investment yield tax on value of all assets (including shares) in excess of exemption. No, the availability of a corporate tax deduction for stock-based compensation was eliminated effective January 1, 2007. Income Tax: Withholding and reporting required. Social Insurance Contributions: Yes, employee and employer contributions due to the extent applicable wage ceiling not met. If applicable, employer must withhold employee’s portion of social insurance contributions. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. None. Possible plan entitlement issues. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the plan. It is advisable to get works council to agree in writing that plan is not an employment condition; otherwise, works council approval may be required to implement or terminate plan and courts may consider plan benefits in calculating severance award. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most countries, including the Netherlands, have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 79 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Netherlands RS/RSU Tax at grant for RS; tax at vesting for RSU. Taxable amount is generally fair market value of the shares on the tax event. No tax on sale provided employee does not hold a substantial interest (5%) in company’s stock. Annual investment yield tax on value of all assets (including shares) in excess of exemption. No, the availability of a corporate tax deduction for stock-based compensation was eliminated effective January 1, 2007. Income Tax: Withholding and reporting required. Social Insurance Contributions: Yes, employee and employer contributions due to the extent applicable wage ceiling not met. If applicable, employer must withhold employee’s portion of social insurance contributions. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Possible plan entitlement issues. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the plan. It is advisable to get works council to agree in writing that plan is not an employment condition; otherwise, works council approval may be required to implement or terminate plan and courts may consider plan benefits in calculating severance award. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most countries, including the Netherlands, have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Netherlands Cash Award Taxed at payment. Taxable amount is amount of the cash payment. A local tax deduction is generally available because subsidiary bears the cost of award. Written agreement Income Tax: Withholding and reporting required. Social Insurance Contributions: None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy © 2017 Baker McKenzie. 80 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy recommended. Yes, employee and employer contributions due to the extent applicable wage ceiling not met. If applicable, employer must withhold employee’s portion of social insurance contributions. indemnities, obligation to consult works council, etc. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the award. It is advisable to get works council to agree in writing that award is not an employment condition; otherwise, works council approval may be required to implement or terminate award/cash program and courts may consider award benefits in calculating severance award. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most countries, including the Netherlands, have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. New Zealand OPTION Tax on spread at exercise. Generally, no tax on sale provided shares Allowed if subsidiary reimburses parent under a written reimbursement Income Tax: Recently enacted legislation provides that the local Yes, but an exemption from the prospectus disclosure requirement should apply. The employee share scheme None. Generally no, if employees sign an agreement containing certain disclaimer language. Written consent from employees for the collection, use and transfer of data abroad is required. © 2017 Baker McKenzie. 81 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy are not sold immediately after acquisition. However, foreign investment fund rules may apply. agreement approved by shareholder(s) of subsidiary and documented. subsidiary may choose to withhold via the PAYE system , in which case, the employee will not have any tax reporting or payment obligations in relation to the benefit. If the local subsidiary elects to utilize the PAYE option, it is not required to do so in relation to all New Zealand participants in the relevant employee share plan, and the election is revocable. Regardless of whether the local subsidiary chooses the PAYE option, the local subsidiary is required to report any income from the award derived after April 1, 2017 in its monthly schedule. Social Insurance Contributions: No. exemption is available for offers of securities if considered part of the employee’s remuneration / made in connection with employment and certain other conditions are satisfied (including providing a prescribed warning statement and certain financial information to employees; in some cases, a notice filing to the authorities may be required). The small offers exemption is available for offers of securities if made to 20 or fewer persons and with a value of NZ2 million or less in a 12 month period and certain other conditions are satisfied (including providing a prescribed warning statement to employees and a notice filing to the authorities). Contact Baker McKenzie for more details. The subsidiary's privacy officer should ensure that data transfers comply with the principles of the Privacy Act. New Zealand ESPP Tax on discount at purchase. Generally, no tax on sale provided shares are not sold immediately after acquisition. However, foreign investment fund rules may apply. Allowed if subsidiary reimburses parent under a written reimbursement agreement approved by shareholder(s) of subsidiary and documented. Income Tax: Recently enacted legislation provides that the local subsidiary may choose to withhold via the PAYE system , in which case, the employee will not have any tax reporting or payment obligations in relation to the benefit. If the local subsidiary elects to utilize the PAYE option, it is not required to do so in Yes, but an exemption from the prospectus disclosure requirement should apply. The employee share scheme exemption is available for offers of securities if considered part of the employee’s remuneration / made in connection with employment and certain other conditions are satisfied (including providing a prescribed warning statement and certain financial information to employees; in some cases, a notice filing to the authorities may be required). The small offering exemption is available for offers of securities if None. Generally no, if employees sign an agreement containing certain disclaimer language. Written consent from employees for the collection, use and transfer of data abroad is required. The subsidiary's privacy officer should ensure that data transfers comply with the principles of the Privacy Act. © 2017 Baker McKenzie. 82 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy relation to all New Zealand participants in the relevant employee share plan, and the election is revocable. Regardless of whether the local subsidiary chooses the PAYE option, the local subsidiary is required to report any income from the award derived after April 1, 2017 in its monthly schedule. Social Insurance Contributions: No. made to 20 or fewer persons and with a value of NZ2 million or less in a 12 month period and certain other conditions are satisfied (including providing a prescribed warning statement to employees and completing a notice filing with the securities regulator). *It may be required to place payroll deductions for an ESPP in a trust account. Contact Baker McKenzie for more details. New Zealand RS/RSU 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 on sale provided shares are not sold immediately after acquisition. However, foreign investment fund rules may apply. Allowed if subsidiary reimburses parent under a written reimbursement agreement approved by shareholder(s) of subsidiary and documented. Income Tax: Recently enacted legislation provides that the local subsidiary may choose to withhold via the PAYE system , in which case, the employee will not have any tax reporting or payment obligations in relation to the benefit. If the local subsidiary elects to utilize the PAYE option, it is not required to do so in relation to all New Zealand participants in the relevant employee share plan, and the election is revocable. Regardless of whether the local subsidiary chooses the PAYE option, the Yes, but an exemption from the prospectus disclosure requirement should apply. The overseas issuer exemption is generally available for public companies if the issuer complies with exemption requirements by providing prescribed information to employees and filing financial disclosure documents with the authorities. Further, under this exemption, the issuer must comply with requirements of Financial Reporting Act, including filing financial disclosure documents with directors' signatures and signed auditor’s report with the authorities. The small offering exemption is available for offers of securities if made to 20 or fewer persons and with a value of NZ2 million or less in a 12 month period and certain other conditions are satisfied (including providing a prescribed warning statement to employees and a notice filing to the authorities). Contact Baker McKenzie for more details. None. Generally no, if employees sign an agreement containing certain disclaimer language. Written consent from employees for the collection, use and transfer of data abroad is required. The subsidiary's privacy officer should ensure that data transfers comply with the principles of the Privacy Act. © 2017 Baker McKenzie. 83 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy local subsidiary is required to report any income from the award derived after April 1, 2017 in its monthly schedule. Social Insurance Contributions: No. New Zealand Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of the award. If not, written reimbursement agreement recommended and may need to be approved by shareholder(s) of subsidiary and documented. Income Tax: Yes (including the Accident Compensation Corporation earner levy). Social Insurance Contributions: Yes. Employer and employee contributions (KiwiSaver) are due. Employer must withhold employee’s contributions. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the plan. Written consent from employees for the collection, use and transfer of data abroad is required. The subsidiary's privacy officer should ensure that data transfers comply with the principles of the Privacy Act. Norway OPTION Tax on spread at exercise. Spread realized at exercise may be apportioned over the time period between grant and exercise. Also, modest reduction of taxable income may be available if grants made to all employees. Tax on sale. Shares, and possibly vested options, are subject to annual wealth tax. Probably allowed if subsidiary reimburses parent, especially if treasury shares are issued. Written reimbursement agreement advisable. Income Tax: Yes, withholding and reporting required. Social Insurance Contributions: Yes. Employer and employee contributions are due. Employer must withhold employee’s contributions. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Generally, no. Possible plan entitlement issues. Statement regarding discretionary nature of the plan should be signed by employees. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may © 2017 Baker McKenzie. 84 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Norway ESPP Tax on discount at purchase. Modest reduction of taxable income may apply if grants made to all employees. Tax on sale. Shares, but likely not ESPP rights, are subject to annual wealth tax. Probably allowed if subsidiary reimburses parent, especially if treasury shares are issued. Written reimbursement agreement advisable. Income Tax: Yes, withholding and reporting required. Social Insurance Contributions: Yes. Employer and employee contributions are due. Employer must withhold employee’s contributions. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. Generally, no. Possible plan entitlement issues. Statement regarding discretionary nature of the plan should be signed by employees. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in © 2017 Baker McKenzie. 85 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Norway RS/RSU Tax at grant for RS; tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Taxable amount for RSU may be apportioned over the time period between grant and vesting, although this is not entirely clear. Also, modest reduction of taxable income may be available if grants made to all employees. Tax on sale. Shares, but not RSUs, are subject to annual wealth tax. Probably allowed if subsidiary reimburses parent, especially if treasury shares are issued. Written reimbursement agreement advisable. Income Tax: Yes, withholding and reporting required. Social Insurance Contributions: Yes. Employer and employee contributions are due. Employer must withhold employee’s contributions. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Generally, no. Possible plan entitlement issues. Statement regarding discretionary nature of the plan should be signed by employees. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 86 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Norway Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. If not, written reimbursement agreement recommended. Income Tax: Yes, withholding and reporting required. Social Insurance Contributions: Yes. Employer and employee contributions are due. Employer must withhold employee’s contributions. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Statement regarding discretionary nature of the plan should be signed by employees. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Peru OPTION Tax on spread at exercise. Tax on sale. Yes, if subsidiary reimburses parent. Written reimbursement agreement and other documents recommended. Income Tax: Yes, withholding and reporting required. Social Insurance Contribution: Yes. Employee and employer social insurance No registration required. It is recommended to provide certain information to employees, e.g., annual report and/or Form 10-K. Contact Baker McKenzie for more details. None. Written disclaimer recommended to reduce the risk of plan entitlement. Written consent from employees to transfer of personal data abroad is recommended. Also, the holders of personal data banks are required to register the data banks before the National Registry of © 2017 Baker McKenzie. 87 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy contributions are due. Personal Data Protection, as well as communicate any cross-border transfer. Peru ESPP Tax on discount at purchase. Tax on sale. Yes, if subsidiary reimburses parent. Written reimbursement agreement and other documents recommended. Income Tax: Yes, withholding and reporting required. Social Insurance Contribution: Yes. Employee and employer social insurance contributions are due. No registration required. It is recommended to provide certain information to employees, e.g., annual report and/or Form 10-K. Contact Baker McKenzie for more details. None. Written disclaimer recommended to reduce the risk of plan entitlement. Written consent from employees to transfer of personal data abroad is recommended. Also, the holders of personal data banks are required to register the data banks before the National Registry of Personal Data Protection, as well as communicate any cross-border transfer. Peru RS/RSU Tax at vesting for RS/RSUs. Taxable amount is fair market value of the shares on the tax event. Tax on sale. Yes, if subsidiary reimburses parent. Written reimbursement agreement and other documents recommended. Income Tax: Yes, withholding and reporting required. Social Insurance Contribution: Yes. Employee and employer social insurance contributions are due. No registration required. It is recommended to provide certain information to employees, e.g., annual report and/or Form 10-K. Contact Baker McKenzie for more details. None. Written disclaimer recommended to reduce the risk of plan entitlement. Written consent from employees to transfer of personal data abroad is recommended. Also, the holders of personal data banks are required to register the data banks before the National Registry of Personal Data Protection, as well as communicate any cross-border transfer. © 2017 Baker McKenzie. 88 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Peru Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. If not, written reimbursement agreement and other documents recommended. Income Tax: Withholding and reporting required. Social Insurance Contributions: Yes. Employee and employer social insurance contributions are due. No registration required. It is recommended to provide certain information to employees, e.g., annual report and/or Form 10-K. Contact Baker McKenzie for more details. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Written consent from employees to transfer of personal data abroad is recommended. Also, the holders of personal data banks are required to register the data banks before the National Registry of Personal Data Protection, as well as communicate any cross-border transfer. Philippines OPTION Tax on spread at exercise. If subsidiary reimburses parent or records an expense on its local books for the spread, fringe benefit tax payable by employer will apply (instead of income tax payable by employee) for non-rank-and-file employees. Tax on sale. Probably allowed if subsidiary reimburses parent under a written reimbursement agreement and required withholdings are made. Triggers tax withholding and social insurance contributions, as well as employerpaid fringe benefit tax for non-rankand-file employees. Income Tax: Likely no, unless subsidiary reimburses parent and/or records an expense on its local books, and/or the award is a part of the local compensation arrangement. Social Insurance Contributions: Likely no, unless subsidiary reimburses parent and/or the award is a part of the local compensation arrangement. Need to request exemption from Philippines Securities and Exchange Commission and pay exemption fee. Ongoing requirements apply. Selfexecuting exemption for grants to fewer than 20 employees likely no longer available. Generally, no. Not generally, if not an “employer practice.” Statement regarding discretionary nature of plan should be acknowledged by employees. Written consent from employees for the transfer of data abroad should be obtained. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Philippines ESPP Tax on discount at purchase. If subsidiary reimburses parent or records an expense on its local books for the discount, fringe benefit tax payable by employer will apply (instead of income tax payable by employee) for non-rank-and-file Probably allowed if subsidiary reimburses parent under a written reimbursement agreement and required withholdings are made. Triggers tax withholding and social insurance contributions, as well as employerIncome Tax: Likely no, unless subsidiary reimburses parent and/or records an expense on its local books, and/or the award is a part of the local compensation arrangement. Need to request exemption from Philippines Securities and Exchange Commission and pay exemption fee. Ongoing requirements apply. Selfexecuting exemption for grants to fewer than 20 employees likely no longer available. Generally, no. Not generally, if not an “employer practice.” Statement regarding discretionary nature of plan should be acknowledged by employees. Written consent from employees for the transfer of data abroad should be obtained. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration © 2017 Baker McKenzie. 89 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy employees. Tax on sale. paid fringe benefit tax for non-rankand-file employees. Social Insurance Contributions: Likely no, unless subsidiary reimburses parent and/or the award is a part of the local compensation arrangement. obligations). Philippines RS/RSU Tax at vesting for RS/RSUs. Taxable amount is fair market value of the shares on the tax event. If subsidiary reimburses parent or records an expense on its local books, fringe benefit tax payable by employer will apply (instead of income tax payable by employee) for non-rank-and-file employees. Tax on sale. Probably allowed if subsidiary reimburses parent under a written reimbursement agreement and required withholdings are made. Triggers tax withholding and social insurance contributions, as well as employerpaid fringe benefit tax for non-rankand-file employees. Income Tax: Likely no, unless subsidiary reimburses parent and/or records an expense on its local books, and/or the award is a part of the local compensation arrangement. Social Insurance Contributions: Likely no, unless subsidiary reimburses parent and/or the award is a part of the local compensation arrangement. Need to request exemption from Philippines Securities and Exchange Commission and pay exemption fee. Ongoing requirements apply. Selfexecuting exemption for grants to fewer than 20 employees likely no longer available. Generally, no. Not generally, if not an “employer practice.” Statement regarding discretionary nature of plan should be acknowledged by employees. Written consent from employees for the transfer of data abroad should be obtained. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). Philippines Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. If not, written agreement recommended. Income Tax: Likely yes. Social Insurance Contributions: Likely yes. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Written consent from employees for the transfer of data abroad should be obtained. Companies are advised to check with their data privacy counsel to determine any other requirements (such as notification or registration obligations). © 2017 Baker McKenzie. 90 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Poland OPTION Likely tax on spread at exercise. A tax deferral until sale may be available if issuer is an EU or EEA based company and awards made based on shareholder resolution. Tax on sale. There is a risk that tax may be due on the sale proceeds minus the exercise price resulting in double taxation of the spread. Likely allowed if subsidiary reimburses parent pursuant to a written reimbursement agreement, but this may cause income to be considered as arising from employment relationship triggering tax withholding, reporting and social insurance obligations. Income Tax: No, unless the income realized is considered to arise from the employment relationship and possibly, if the local subsidiary reimburses the parent. Social Insurance Contributions: No, unless the income realized is considered to arise from the employment relationship and possibly, if the local subsidiary reimburses the parent. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor employee reporting requirements apply. No, provided right to terminate plan is reserved in writing. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Poland ESPP Likely tax on discount at purchase. A tax deferral until sale may be available if issuer is an EU or EEA based company and awards made based on shareholder resolution. Tax on sale. There is a Likely allowed if subsidiary reimburses parent pursuant to a written reimbursement agreement, but this may cause income to be considered as arising from Income Tax: No, unless the income realized is considered to arise from the employment relationship and possibly, if the local subsidiary reimburses the parent. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Minor employee reporting requirements apply. No, provided right to terminate plan is reserved in writing. Employee participating in ESPP must provide a payroll deduction authorization form to the local employer, authorizing it to take payroll deductions from A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity © 2017 Baker McKenzie. 91 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy risk that tax may be due on the sale proceeds minus the purchase price resulting in double taxation of the discount. employment relationship triggering tax withholding, reporting and social insurance obligations. Social Insurance Contributions: No, unless the income realized is considered to arise from the employment relationship and possibly, if the local subsidiary reimburses the parent. Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. the employee’s salary up to 20% of the minimum monthly wage of a fulltime employee, as determined each year. Consent to deductions should be memorialized by a written signature and should dictate: what, how much, and why. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly provisions with age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Poland RS/RSU Likely tax at vesting on fair market value of the shares, although for RS there is a risk for taxation at grant. A tax deferral until sale may be available if issuer is an EU or EEA based company and awards made based on shareholder resolution. Tax on sale. There is a risk that tax may be due on the entire sale proceeds resulting in double taxation of a Likely allowed if subsidiary reimburses parent pursuant to a written reimbursement agreement, but this may cause income to be considered as arising from employment relationship triggering tax withholding, reporting and social insurance obligations. Income Tax: No, unless the income realized is considered to arise from the employment relationship and possibly, if the local subsidiary reimburses the parent. Social Insurance Contributions: No, unless the income realized is considered to arise No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor employee reporting requirements apply. No, provided right to terminate plan is reserved in writing Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC covers age discrimination . Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific © 2017 Baker McKenzie. 92 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy portion of the gain. from the employment relationship and possibly, if the local subsidiary reimburses the parent. particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Poland Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. If not, likely allowed if subsidiary reimburses parent pursuant to a written reimbursement agreement. Income Tax: Withholding and reporting required where payment is through local payroll. Social Insurance Contributions: Yes. Employee and employer contributions due and employer must withhold employee portion where payment is through local payroll. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. No, provided right to terminate plan is reserved in writing. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC covers age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, © 2017 Baker McKenzie. 93 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy incentive plans in the EU, particularly provisions with age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Portugal OPTION Tax on spread at exercise. Tax on gain at sale. Yes, if subsidiary reimburses parent. Income Tax: No withholding. Reporting requirements apply. Social Insurance Contributions: No. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor employee reporting requirements may apply. Written consent from employees for the transfer of data abroad is recommended. Written disclaimer important to reduce risk of plan entitlement. Irregular grants reduce risk. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 94 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Portugal ESPP Tax on discount at purchase. Tax on gain at sale. Yes, if subsidiary reimburses parent. Income Tax: No withholding. Reporting requirements apply. Social Insurance Contributions: No. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. Minor employee reporting requirements may apply. *Payroll deductions should be held in a separate account. Written disclaimer important to reduce risk of plan entitlement. Irregular grants reduce risk. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Portugal RS/RSU Tax at vesting for RS/RSU. Taxable amount is fair market value of the shares on the tax event. Tax on gain at sale. Yes, if subsidiary reimburses parent. Income Tax: No withholding. Reporting requirements apply. Social Insurance Contributions: Social insurance contribution obligations uncertain No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Minor employee reporting requirements may apply. Written disclaimer important to reduce risk of plan entitlement. Irregular grants reduce risk. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a © 2017 Baker McKenzie. 95 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy due to unclear guidance on whether normal social insurance exemption applies. age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Portugal Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. If not, written agreement recommended. Income Tax: The employer is likely required to withhold income tax. Reporting requirements apply. Social Insurance Contributions: Yes, employee and employer contributions due to the extent applicable wage ceiling not met. If applicable, employer has to withhold employee’s portion of social insurance contributions. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. If awards are granted as a regular, annual basis, there is a risk they will be treated as vested rights Discrimination against union or part-time employees is prohibited. The EU Council Directive 2000/78/EC prohibits A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. © 2017 Baker McKenzie. 96 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Russia OPTION Under current law, tax may be due at grant on the option fair value and, again at exercise on the spread. However, various private rulings of the Federal Tax Service indicate that no taxation should apply on the grant. Tax at the sale of shares. Possibly available, subject to proper structuring of the recharge arrangement. However, this would trigger withholding and reporting obligations and partially uncapped social insurance obligations. Income Tax/Social Insurance Contributions: Withholding and reporting and social insurance contributions should not apply provided the grant is structured to be outside the employment relationship and costs are not charged to the local subsidiary. There is some risk that options may be subject to securities registration requirements; however, based on informal guidance, offers by foreign issuers to employees of subsidiaries in Russia should fall outside such requirements if steps are taken to ensure the offer takes place outside Russia. Alternatively, an exception to the registration requirement applies if the award is mentioned in the local employment documentation; however, this may trigger withholding and reporting and social insurance contributions as well as plan entitlement risks. Certain requirements apply to subsidiary when remitting funds out of Russia, which vary depending on whether funds are remitted by wire transfer or intercompany transfer. Sale proceeds or other foreign currency payments (other than dividends) should be initially credited to a Russian national's foreign currency bank account at an authorized bank in Russia if they are not held in a foreign brokerage account. Subsequently, they can be transferred to the Russian national's foreign bank account without any restrictions. None, provided the grant is structured to be outside the employment relationship. Employee’s written consent to the transfer of personal data should be obtained. Also, all personal data related to Russian nationals must reside in Russia. Exports of data are allowed so long as changes to the data are made in Russia. © 2017 Baker McKenzie. 97 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Russia ESPP Under current law, tax may be due at grant on fair value of the purchase right, and again on the discount at purchase. However, various private rulings of the Federal Tax Service indicate that no taxation should apply on the grant. Tax at sale of shares. Possibly available, subject to proper structuring of the recharge arrangement. How ever, this would trigger withholding and reporting obligations and partially uncapped social insurance obligations. Income Tax/Social Insurance Contributions: Withholding and reporting and social insurance contributions should not apply provided the ESPP offer is structured to be outside the employment relationship, and costs are not charged to the local subsidiary. There is some risk that purchase rights under an ESPP may be subject to securities registration requirements; however, based on informal guidance, offers by foreign issuers to employees of subsidiaries in Russia should fall outside such requirements if steps are taken to ensure the offer takes place outside Russia. Alternatively, an exception to the registration requirement applies if the award is mentioned in the local employment documentation; however, this may trigger withholding and reporting and social insurance contributions as well as plan entitlement risks. Certain requirements apply to subsidiary when remitting funds out of Russia, which vary depending on whether funds are remitted by wire transfer or intercompany transfer. Sale proceeds or other foreign currency payments (other than dividends) should be initially credited to a Russian national's foreign currency bank account at an authorized bank in Russia if they are not held in a foreign brokerage account. Subsequently, they can be transferred to the Russian national's foreign bank account without any restrictions. None, provided the ESPP offer is structured outside the employment relationship. Employee’s written consent to the transfer of personal data should be obtained. Also, all personal data related to Russian nationals must reside in Russia. Exports of data are allowed so long as changes to the data are made in Russia. Russia RS/RSU Tax at vesting for RS/RSU. Taxable amount is fair market value of the shares on the tax event. Tax at sale of shares. Possibly available, subject to proper structuring of the recharge arrangement. How ever, this would trigger withholding and reporting obligations and partially uncapped social insurance obligations. Income Tax/Social Insurance Contributions: Withholding and reporting and social insurance contributions should not apply provided the award is structured to be outside the employment relationship, and costs are not charged to the local subsidiary. There is some risk that RS/RSUs may be subject to securities registration requirements; however, based on informal guidance, offers by foreign issuers to employees of subsidiaries in Russia should fall outside such requirements if steps are taken to ensure the offer takes place outside Russia. Alternatively, an exception to the registration requirement applies if the award is mentioned in the local employment documentation; however, this may trigger withholding and reporting and social insurance contributions as well as plan entitlement risks. Sale proceeds or other foreign currency payments (other than dividends) should be initially credited to a Russian national's foreign currency bank account at an authorized bank in Russia if they are not held in a foreign brokerage account. Subsequently, they can be transferred to the Russian national's foreign bank account without any restrictions. None, provided that the award is structured outside the employment relationship. Employee’s written consent to the transfer of personal data should be obtained. Also, all personal data related to Russian nationals must reside in Russia. Exports of data are allowed so long as changes to the data are made in Russia. © 2017 Baker McKenzie. 98 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Russia Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Yes, subject to proper structuring of the recharge arrangement. If not, written agreement is required. Income Tax: Withholding and reporting required. Social Insurance Contributions: Yes. Employer social insurance contributions are due. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include the cash amount when calculating termination indemnities, obligation to consult works council, etc. Employee’s written consent to the transfer of personal data should be obtained. Also, all personal data related to Russian nationals must reside in Russia. Exports of data are allowed so long as changes to the data are made in Russia. Saudi Arabia OPTION Income tax does not apply. No taxation at sale. Not available. Income Tax: N/A Social Insurance Contribution: Pursuant to unofficial guidance, option income is not wages for social insurance purposes. A pre-offer notification and post-offer report must be filed with the Capital Markets Authority ("CMA") to rely on private placement exemption for the offer of stock options. Reliance on private placement exemption should be noted in grant document. Saudi bank/financial institution must be retained to submit the filings. Frequency of ongoing pre-offer and post-offer notifications may vary depending upon bank or institution used. Contact Baker McKenzie for more details. None. Generally no, provided awards are not addressed in the employment contract but employee should be required to acknowledge discretionary nature of plan. Written consent from employees for the collection, use and transfer of data abroad is recommended. Saudi Arabia ESPP Income tax does not apply. No taxation at sale. not available. Income Tax: N/A Social Insurance Contribution: Pursuant to unofficial guidance, ESPP income is not wages for social insurance purposes. A pre-offer notification and post-offer report must be filed with the Capital Markets Authority ("CMA") to rely on private placement exemption for the offer of ESPP. Reliance on private placement exemption should be noted in ESPP documentation. Saudi bank/financial institution must be retained to submit the filings. Frequency of ongoing pre-offer and post-offer notifications may vary depending upon bank or institution used. Contact Baker McKenzie for more details. None. Generally no, provided ESPP is not addressed in the employment contract but employee should be required to acknowledge discretionary nature of plan. Written consent from employees for the collection, use and transfer of data abroad is recommended. © 2017 Baker McKenzie. 99 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Saudi Arabia RS/RSU Income tax does not apply. No taxation at sale. Not available. Income Tax: N/A Social Insurance Contribution: Pursuant to unofficial guidance, RS/RSU income is not wages for social insurance purposes. A pre-offer notification and post-offer report must be filed with the Capital Markets Authority ("CMA") to rely on private placement exemption for the offer of RS/RSUs. Reliance on private placement exemption should be noted in grant document. Saudi bank/financial institution must be retained to submit the filings. Frequency of ongoing pre-offer and post-offer notifications may vary depending upon bank or institution used. Contact Baker McKenzie for more details. None Generally no, provided awards are not addressed in the employment contract but employee should be required to acknowledge discretionary nature of plan. Written consent from employees for the collection, use and transfer of data abroad is recommended. Saudi Arabia Cash Award Income tax does not apply. Not available. Income Tax: N/A Social Insurance Contributions: No, provided the award is not classified as part of the employee wages; grant documentation should include special provision to minimize risk of award being considered part of wages. Under current practice, likely none. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include the cash amount when calculating termination indemnities, obligation to consult works council, etc. Written consent from employees for the collection, use and transfer of data abroad is recommended. Singapore OPTION Tax on spread at exercise. Employee may be able to defer tax or take a (partial) tax exemption if certain conditions are met. Regime providing for a partial tax exemption is no longer available for awards granted on or after January 1, 2014 but will continue to apply to grants prior to such date if conditions met. Allowed if treasury shares are used to settle awards and subsidiary reimburses parent under a written reimbursement agreement, but limited to the amount that the parent paid to acquire the treasury shares minus the amount paid for the shares by the employee. Income Tax: Generally no withholding (except for certain expatriates ceasing employment and/or leaving Singapore based on deemed equity income). Reporting requirements apply. Social Insurance Contributions: Generally, no. Generally, employee share plan exemption applies. Certain subsidiary director and CEO reporting obligations apply. None. Plan and agreements should indicate plan is discretionary. Written consent from employees for the transfer of data abroad is recommended. © 2017 Baker McKenzie. 100 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Expatriate employees ceasing employment or leaving Singapore may be deemed to have exercised options and be subject to taxation upon termination/leaving Singapore. No tax on sale. Singapore ESPP Tax on discount at purchase. Expatriate employees ceasing employment or leaving Singapore may be deemed to have exercised ESPP rights and be subject to taxation upon termination/leaving Singapore. No tax on sale. Allowed if treasury shares used to settle awards and subsidiary reimburses parent under a written reimbursement agreement, but limited to the amount that the parent paid to acquire the treasury shares minus the amount paid for the shares by the employee. Income Tax: Generally no withholding (except for certain expatriates ceasing employment and/or leaving Singapore based on deemed equity income). Reporting requirements apply. Social Insurance Contributions: Generally, no. Generally, employee share plan exemption applies. Certain subsidiary director and CEO reporting obligations apply. None. Plan and enrollment forms should indicate plan is discretionary. *Ministry of Manpower approval required for ESPP if payroll deductions will be taken from the pay of employees whose monthly salary is below a specified threshold. Written consent from employees for the transfer of data abroad is recommended. Singapore RS/RSU Tax at vesting. Taxable amount is fair market value of the shares. Employee may be able to defer tax or take a (partial) tax exemption if certain conditions are met. Regime providing for a partial tax exemption is no longer available for awards granted on or after January 1, 2014 but will continue to apply to grants prior to such date if conditions met. Expatriate employees ceasing employment or leaving Singapore may be deemed to have Allowed if treasury shares used to settle awards and subsidiary reimburses parent under a written reimbursement agreement, but limited to the amount that the parent paid to acquire the treasury shares minus any amount paid for the shares by the employee. Income Tax: Generally no withholding (except for certain expatriates ceasing employment and/or leaving Singapore based on deemed equity income). Reporting requirements apply. Social Insurance Contributions: Generally, no. Generally, employee share plan exemption applies. Certain subsidiary director and CEO reporting obligations apply. None. Plan and agreements should indicate plan is discretionary. Written consent from employees for the transfer of data abroad is recommended. © 2017 Baker McKenzie. 101 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy vested in RS/RSUs and be subject to taxation upon termination/leaving Singapore. No tax on sale. Singapore Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Although the exit tax rules are not as clear for cash-settled awards, expatriate employees ceasing employment or leaving Singapore may be deemed to have vested in the award and be subject to taxation upon termination/leaving Singapore. Generally yes, if subsidiary bears the cost of award. Written agreement recommended. Income Tax: Generally no withholding (except for certain expatriates ceasing employment and/or leaving Singapore based on deemed award income, if applicable). Reporting requirements apply. Social Insurance Contributions: Employer and employee Central Provident Fund contributions will be due, subject to applicable contribution ceilings. Generally, employee share plan exemption applies. Certain subsidiary director and CEO reporting obligations may apply. None. Plan and agreements should indicate plan is discretionary. Written consent from employees for the transfer of data abroad is recommended. Slovak Republic OPTION Options granted on or after January 1, 2010 taxed on the spread at exercise. Options granted between December 15, 2005 and December 31, 2009 likely taxed at vesting and exercise. The taxable amount at vesting will likely be the difference between the exercise price and the fair market value of the shares at vesting. The taxable amount at exercise will likely be Yes, if reimbursement made by subsidiary to the parent. Written reimbursement agreement is recommended. Income Tax: Yes. Reporting and withholding required. Social Insurance Contributions: Yes, as of January 1, 2011, both employer and employee social and health insurance contributions due. Health insurance contributions are uncapped. Employer has to withhold employee’s No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Possible plan entitlement issues. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the plan. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. © 2017 Baker McKenzie. 102 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy the difference between the fair market value of the shares at vesting and the fair market value of the shares at exercise. Tax on sale, subject to a possible exemption. Some risk of double taxation. contributions. Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Slovak Republic ESPP Tax on discount at purchase. Tax on sale, subject to a possible exemption. Some risk of double taxation. Yes, if reimbursement made by subsidiary to the parent. Written reimbursement agreement is recommended. Income Tax: Yes. Reporting and withholding required. Social Insurance Contributions: Yes, both employer and employee social and health insurance contributions due. Health insurance contributions are uncapped. Employer has to withhold employee’s contributions. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. None. Possible plan entitlement issues. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the plan. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and © 2017 Baker McKenzie. 103 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Slovak Republic RS/RSU Tax at vesting. Taxable amount is fair market value of the shares at vesting. Tax on sale, subject to a possible exemption. Some risk of double taxation. Yes, if reimbursement made by subsidiary to the parent. Written reimbursement agreement is recommended. Income Tax: Yes. Reporting and withholding required. Social Insurance Contributions: Yes, both employer and employee social and health insurance contributions due. Health insurance contributions are uncapped. Employer has to withhold employee’s contributions. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. Possible plan entitlement issues. Employee should be required to sign/accept an agreement acknowledging the discretionary nature of the plan. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 104 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Slovak Republic Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Yes, because subsidiary bears the cost of the awards. Written reimbursement agreement is recommended. Income Tax: Yes. Reporting and withholding required. Social Insurance Contributions: Yes, both employer and employee social and health insurance contributions due. Health insurance contributions are uncapped. Employer has to withhold employee’s contributions. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. If the grant documentation expressly states that the cash payment will not become an “acquired right,” the language of the grant documentation should be sufficient to protect against claims of an acquired right. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. South Africa OPTION Tax on spread at exercise. Tax on sale, subject to exemption. Allowed if the subsidiary reimburses the parent under a written reimbursement agreement. However, subject to exchange control approval. Income Tax: Yes. Local subsidiary must obtain directive from South African Revenue Service to determine appropriate withholding amount prior to withholding for each taxable Prospectus requirements apply. A “small offering” exemption from prospectus requirements is available for companies making a single offering to 50 or fewer persons in a 12-month period with a value equal to or less than ZAR1 million. To rely on the exemption, the offer must be finalized within 6 months. Plan must be placed on record with Financial Surveillance Department. Employees must complete certain other steps to remit funds out of South Africa to exercise options. ZAR1 million annual discretionary allowance Generally not, if certain disclaimer language in included in the award agreement. Otherwise, risk that plan benefits could be considered compensation for purposes of calculating benefits for unfair termination. Written consent from employees for transfer of personal data is required. © 2017 Baker McKenzie. 105 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy event. An exemption may apply for certain broad-based plans. Social Insurance Contributions: Yes, for both the employee and employer unless ceiling met. Employer has to withhold employee’s contributions. Employer also must pay uncapped skills development levy on income. Alternatively, an employee share scheme exemption from prospectus requirements is available, provided certain requirements are met, including appointing a “compliance officer,” providing certain written disclosures to employees and filing certain “registration” documents and an annual report with the South African Companies and Intellectual Property Commission. Contact Baker McKenzie for further details. and an additional ZAR10 million annual offshore investment limit applies to employees. The local subsidiary has to obtain approval for reimbursement payment. South Africa ESPP Tax on discount at purchase. Tax on sale, subject to exemption. Allowed if the subsidiary reimburses the parent under a written reimbursement agreement. However, subject to exchange control approval. Income Tax: Yes. Local subsidiary must obtain directive from South African Revenue Service to determine appropriate withholding amount prior to withholding for each taxable event. An exemption may apply for certain broad-based plans Social Insurance Contributions: Yes, for both the employee and employer unless ceiling met. Employer has to withhold employee’s contributions. Employer also must pay uncapped skills development levy on income. Prospectus requirements apply. A “small offering” exemption from the prospectus requirements is available for companies making a single offering to 50 or fewer persons in a 12-month period with a value equal to or less than ZAR1 million. To rely on the exemption, the offer must be finalized within 6 months. Alternatively, an employee share scheme exemption from prospectus requirements is available, provided certain requirements are met, including appointing a “compliance officer,” providing certain written disclosures to employees and filing certain “registration” documents and an annual report with the South African Companies and Intellectual Property Commission. Contact Baker McKenzie for further details. Plan must be placed on record with Financial Surveillance Department. Local subsidiary must also complete other steps to remit payroll deductions out of South Africa on behalf of employees. ZAR1 million annual discretionary allowance and an additional ZAR10 million annual offshore investment limit applies to employees. The local subsidiary has to obtain approval for reimbursement payment. Generally not, if certain disclaimer language is included in the enrollment documentation. Otherwise, risk that plan benefits could be considered compensation for purposes of calculating benefits for unfair termination. Written consent from employees for transfer of personal data is required. © 2017 Baker McKenzie. 106 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy South Africa RS/RSU Tax may be at vesting for RS depending on the restrictions; otherwise, tax at grant. Tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Tax on sale, subject to exemption. Allowed if the subsidiary reimburses the parent under a written reimbursement agreement. However, subject to exchange control approval. Income Tax: Yes. Local subsidiary must obtain directive from South African Revenue Service to determine appropriate withholding amount prior to withholding for each taxable event. An exemption may apply for certain broad-based plans Social Insurance Contributions: Yes, for both the employee and employer unless ceiling met. Employer has to withhold employee’s contributions. Employer also must pay uncapped skills development levy on income. Prospectus requirements apply. A “small offering” exemption from prospectus requirements is available for companies making a single offering to 50 or fewer persons in a 12-month period with a value equal to or less than ZAR1 million. For purposes of the ZAR1 million threshold, RSUs/RS have nil value. To rely on the exemption, the offer must be finalized within 6 months. Alternatively, an employee share scheme exemption from prospectus requirements is available, provided certain requirements are met, including appointing a “compliance officer,” providing certain written disclosures to employees and filing certain “registration” documents and an annual report with the South African Companies and Intellectual Property Commission. Contact Baker McKenzie for further details. Plan must be placed on record with Financial Surveillance Department. The local subsidiary has to obtain approval for reimbursement payment. Generally not, if certain disclaimer language is included in the award agreement. Otherwise, risk that plan benefits could be considered compensation for purposes of calculating benefits for unfair termination. Written consent from employees for transfer of personal data is required. South Africa Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Allowed because the subsidiary bears the cost of award. Written agreement recommended. Income Tax: Yes. Local subsidiary must obtain directive from South African Revenue Service to determine appropriate withholding amount prior to withholding for each taxable event. An exemption may apply for certain broad-based plans. Social Insurance Contributions: Yes, for both the employee and employer unless ceiling met. Employer has to Prospectus requirements may apply. If applicable: A “small offering” exemption from prospectus requirements is available for companies making a single offering to 50 or fewer persons in a 12-month period with a value equal to or less than ZAR1 million. For purposes of the ZAR1 million threshold, awards requiring no payment from the employee have nil value. To rely on the exemption, the offer must be finalized within 6 months. Alternatively, an employee share scheme exemption from prospectus requirements is available, provided certain requirements are met, including appointing a “compliance officer,” providing certain written disclosures to employees and filing None. Awards paid in cash through local payroll generally have increased plan entitlement risks as well as other increased labor law risks, such as the need to include amount in termination indemnities, etc. Written consent from employees for transfer of personal data is required. © 2017 Baker McKenzie. 107 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy withhold employee’s contributions. Employer also must pay uncapped skills development levy on income. certain “registration” documents and an annual report with the South African Companies and Intellectual Property Commission. Contact Baker McKenzie for further details. Spain OPTION Tax on spread at exercise. Exemption may apply provided certain requirements are met. Tax on sale. May be possible if reimbursement made by subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Yes, payment-onaccount / withholding required, unless exemption applies. Social Insurance Contributions: Yes, employee and employer contributions due unless monthly ceiling has already been met. Employer has to withhold employee’s contributions. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Employee reporting requirements apply. Written disclaimer recommended acknowledging voluntary nature of plan and that employee has received copy of plan. Spanish Supreme Court cases have held that the benefit received from option grants must be included in the calculation of severance payments and that terminated employees may have the right to exercise unvested options or continue to vest in options after termination. We recommend inserting disclaimer and U.S. choice of law language, but there is no guarantee that Spanish courts will uphold. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 108 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Spain ESPP Tax on discount at purchase. Exemption may apply provided certain requirements are met. Tax on sale. May be possible if reimbursement made by subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Yes, payment-onaccount / withholding required, unless exemption applies. Social Insurance Contributions: Yes, employee and employer contributions due unless monthly ceiling has already been met. Employer has to withhold employee’s contributions. The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. It is likely that ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation, although some uncertainly exists. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. Employee reporting requirements apply. Written disclaimer recommended acknowledging voluntary nature of plan and that employee has received copy of plan. Spanish Supreme Court cases have held that the benefit received from option grants must be included in the calculation of severance payments and that terminated employees may have the right to exercise unvested options or continue to vest in options after termination. It is uncertain if/how this case law applies to ESPP. We recommend inserting disclaimer and U.S. choice of law language, but there is no guarantee that Spanish courts will uphold. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 109 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Spain RS/RSU Tax at vesting. Taxable amount is fair market value of the shares. Exemption may apply provided certain requirements are met. Tax on sale. May be possible if reimbursement made by subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Yes, payment-onaccount / withholding required, unless exemption applies. Social Insurance Contributions: Yes, employee and employer contributions due unless monthly ceiling has already been met. Employer has to withhold employee’s contributions. No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Employee reporting requirements apply. Written disclaimer recommended acknowledging voluntary nature of plan and that employee has received copy of plan. Spanish Supreme Court cases have held that the benefit received from option grants must be included in the calculation of severance payments and that terminated employees may have the right to continue to vest in options after termination. Similar analysis is likely to be applied to RS/RSUs. We recommend inserting disclaimer and U.S. choice of law language, but there is no guarantee that Spanish courts will uphold. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 110 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Spain Cash Award Tax likely at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: Yes, withholding required. Social Insurance Contributions: Yes, employee and employer contributions due unless monthly ceiling has already been met. Employer has to withhold employee’s contributions. None. None. Written disclaimer recommended acknowledging voluntary nature of plan and that employee has received copy of plan. Spanish Supreme Court cases have held that the benefit received from option grants must be included in the calculation of severance payments and that terminated employees may have the right to continue to vest in options after termination. Similar analysis is likely to be applied to cash-settled awards. We recommend inserting disclaimer and U.S. choice of law language, but there is no guarantee that Spanish courts will uphold. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 111 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Sweden OPTION Tax on spread at exercise. Draft legislation is being considered that would introduce a taxqualified option regime for small start-up companies. The regime would defer taxation of qualified stock options until sale and tax the resulting income at capital gains tax rates. The regime is expected to take effect from January 1, 2018 at the earliest. Tax on sale. Yes, if reimbursement made by subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Yes. Social Insurance Contributions: Yes, the employer must pay social insurance contributions (uncapped). For employees, pension contribution is due on the taxable amount. However, as employees receive a corresponding tax credit for the amount of the pension contribution, this social insurance contribution is not separately withheld. No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. None. No, but written disclaimer advisable. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Sweden ESPP Tax on discount at purchase. Tax on sale. Yes, if reimbursement made by subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Yes. Social Insurance Contributions: Yes, the employer must pay social insurance contributions The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus None. No, but written disclaimer advisable. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity © 2017 Baker McKenzie. 112 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy (uncapped). For employees, pension contribution is due on the taxable amount. However, as employees receive a corresponding tax credit for the amount of the pension contribution, this social insurance contribution is not separately withheld. Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Sweden RS/RSU 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. Yes, if reimbursement made by subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Yes. Social Insurance Contributions: Yes, the employer must pay social insurance contributions (uncapped). For employees, pension contribution is due on the taxable amount. However, as employees receive a corresponding tax credit for the amount of the pension contribution, this social insurance No securities law restrictions or obligations apply. Non-transferable free offers of RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Nontransferable free offers of RS benefit from an exclusion from the application of the EU Prospectus Directive and, its successor, the EU Prospectus Regulation. None. No, but written disclaimer advisable. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may © 2017 Baker McKenzie. 113 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy contribution is not separately withheld. vesting) for those meeting the criteria. also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Sweden Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: Yes. Social Insurance Contributions: Yes, the employer must pay social insurance contributions (uncapped). For employees, pension contribution is due on the taxable amount. However, as employees receive a corresponding tax credit for the amount of the pension contribution, this social insurance contribution is not separately withheld. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. The value of the cash award will need to be included in the calculation of vacation pay. Written disclaimer advisable. Exclusion of part-time employees may be deemed discriminatory. The EU Council Directive 2000/78/EC prohibits age discrimination. Most, if not all, countries have adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in © 2017 Baker McKenzie. 114 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. Switzerland OPTION Options are taxed at exercise on the spread. No tax on the sale of shares provided the shares are not acquired and/or held as a business asset. Allowed if reimbursement by the subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Reporting requirements apply with respect to the grant and exercise of options. Withholding required only for foreign employees with “B” permit and crossborder employees. Social Insurance Contributions: Yes, for both employee and employer. Employer must withhold employee’s contribution. Generally none. None. Generally not, but written disclaimer recommended. Written consent from employees prior to the transfer of data to the parent or a third party administrator is recommended. Switzerland ESPP Tax on discount at purchase. No tax on the sale of shares provided the shares are not acquired and/or held as a business asset. Allowed if reimbursement by the subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Reporting requirements apply with respect to the grant and exercise of purchase rights. Withholding required only for foreign employees with “B” permit and crossborder employees. Social Insurance Contributions: Yes, for both employee and employer. Employer Generally none. None. Generally not, but written disclaimer recommended. Written consent from employees prior to the transfer of data to the parent or a third party administrator is recommended. © 2017 Baker McKenzie. 115 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy must withhold employee’s contribution. Switzerland RS/RSU RSUs taxed at vesting. Generally, tax at grant for RS. Taxable amount is fair market value of the shares on the tax event. For RS, employee should be able to reduce taxable amount to take into account restrictions placed on shares. No tax on the sale of shares provided the shares are not acquired and/or held as a business asset. Allowed if reimbursement by the subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Reporting requirements apply with respect to the grant of RS/RSUs and vesting of RSU. Withholding required only for foreign employees with “B” permit and crossborder employees. Social Insurance Contributions: Yes, for both employee and employer. Employer must withhold employee’s contribution. Generally none. None. Generally not, but written disclaimer recommended. Written consent from employees prior to the transfer of data to the parent or a third party administrator is recommended. Switzerland Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Allowed if reimbursement by the subsidiary to the parent. Written reimbursement agreement advisable. Income Tax: Reporting requirements apply with respect to the payment of the cashsettled awards. Withholding required only for foreign employees with “B” permit and crossborder employees. Social Insurance Contributions: Yes, for both employee and employer. Employer must withhold employee’s contribution. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, statutory benefits such as vacation and sick pay, obligation to consult works council, etc. This risk of an acquired right will also increase if payments under the Plan have been made at least three consecutive times without a disclaimer as to the voluntary nature of such payments. Written consent from employees prior to the transfer of data to the parent or a third party administrator is recommended. © 2017 Baker McKenzie. 116 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy To reduce the risk, a written disclaimer is recommended. The termination clauses and resignation provisions of the Plan may be invalid if the award qualifies as a salary component and the employee has a pro rata claim. Taiwan OPTION Tax on spread at exercise. Generally, no tax on sale. Alternative Minimum Tax: Capital gains from the sale of securities not listed in Taiwan must be included in taxable income when calculating AMT. Allowed if subsidiary reimburses parent under a written reimbursement agreement and reports as required. Income Tax: No withholding required. Reporting required. Social Insurance Contributions: No. None. Minor employee reporting requirements may apply, depending on amount of transaction. Generally not, but written disclaimer recommended. Personal Data Protection Act effective October 1, 2012. Written consent from employees for the transfer of data abroad is recommended. Taiwan ESPP Tax on discount at purchase. Generally, no tax on sale. Alternative Minimum Tax: Capital gains from the sale of securities not listed in Taiwan must be included in taxable income when calculating AMT. Allowed if subsidiary reimburses parent under a written reimbursement agreement and reports as required. Income Tax: No withholding required. Reporting required. Social Insurance Contributions: No. None. Minor employee reporting requirements may apply, depending on amount of transaction. *Banking law problems may arise in Taiwan under an ESPP if interest is paid on payroll deductions or if payroll deductions commingled with the local subsidiary's general funds. Generally not, but written disclaimer recommended. Personal Data Protection Act effective October 1, 2012. Written consent from employees for the transfer of data abroad is recommended. Taiwan RS/RSU Tax at grant for RS; tax likely at issuance of shares for RSU. Taxable amount is fair market value of the shares on the tax event. Allowed if subsidiary reimburses parent under a written reimbursement agreement and withholds or Income Tax: Recent guidance indicates that RSU may not be subject to a withholding obligation, but it is None. Minor employee reporting requirements may apply, depending on amount of transaction. Generally not, but written disclaimer recommended. Personal Data Protection Act effective October 1, 2012. Written consent from employees for © 2017 Baker McKenzie. 117 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Generally, no tax on sale. Alternative Minimum Tax: Capital gains from the sale of securities not listed in Taiwan must be included in taxable income when calculating AMT. reports as required. unclear whether withholding will be required where the subsidiary reimburses the parent for the cost of the RS/RSUs. Reporting required. Social Insurance Contributions: No. the transfer of data abroad is recommended. Taiwan Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Allowed if subsidiary reimburses parent under a written reimbursement agreement and withholds or reports as required. Income Tax: Generally, yes for cash awards. Reporting required. Social Insurance Contributions: Yes, subject to the applicable contribution ceilings. None. Minor employee reporting requirements may apply, depending on amount of transaction. Generally not, but written disclaimer recommended. Personal Data Protection Act effective October 1, 2012. Written consent from employees for the transfer of data abroad is recommended. Thailand OPTION Tax on spread at exercise. Spread is likely to be considered the difference between the exercise price and the average trading price of the shares during the month of exercise. Tax on sale if proceeds are repatriated to Thailand in the same calendar year as the sale (which may be required by exchange control regulations) and the employee is a Thai tax resident for that year. Allowed up to a certain monetary threshold if subsidiary reimburses parent, board of directors of subsidiary approves reimbursement and subsidiary complies with exchange control requirements. Written reimbursement agreement advisable. Income Tax: No, unless subsidiary reimburses parent. Social Insurance Contributions: No. Securities sales report must be filed with Thai SEC within 15 days of the end of the calendar year (possibly not required if cashless exercise). Contact Baker McKenzie for more details. Approval of Bank of Thailand generally required for subsidiary to remit funds for reimbursement. Cashnetting using book entries is prohibited. Employees may remit up to USD1 million per year to purchase securities in foreign companies. Application to a commercial bank/authorized agent is required prior to the remittance of cash for exercise price. If cashless exercise is used, no application is required. Generally, no, but disclaimer recommended to reduce risk. Written consent from employees for the collection, use and transfer of data abroad is recommended. © 2017 Baker McKenzie. 118 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Certain repatriation requirements apply to employees. Thailand ESPP Tax on discount at purchase. Discount is likely to be considered the difference between the purchase price and the average trading price of the shares during the month of purchase. Tax on sale if proceeds are repatriated to Thailand in the same calendar year as the sale (which may be required by exchange control regulations) and the employee is a Thai tax resident for that year. Allowed up to a certain monetary threshold if subsidiary reimburses parent, board of directors of subsidiary approves reimbursement and subsidiary complies with exchange control requirements. Written reimbursement agreement advisable. Income Tax: No, unless subsidiary reimburses parent. Social Insurance Contributions: No. Securities sales report must be filed with Thai SEC within 15 days of the end of each ESPP purchase period. Contact Baker McKenzie for more details. Approval of Bank of Thailand generally required for subsidiary to remit funds for reimbursement. Cashnetting using book entries is prohibited. Employees may remit up to USD1 million per year to purchase securities in foreign companies. Application to a commercial bank/authorized agent is required prior to the remittance of payroll deductions under an ESPP. Certain repatriation requirements apply to employees. Generally, no, but disclaimer recommended to reduce risk. Written consent from employees for the collection, use and transfer of data abroad is recommended. Thailand RS/RSU Tax at grant likely for RS; tax at vesting for RSU. Taxable amount is likely to be considered the average trading price of the shares during the month of the taxable event. Tax on sale if proceeds are repatriated to Thailand in the same calendar year as the sale (which may be required by exchange control regulations) and the employee is a Thai tax resident for that year. Allowed up to a certain monetary threshold if subsidiary reimburses parent, board of directors of subsidiary approves reimbursement and subsidiary complies with exchange control requirements. Written reimbursement agreement advisable. Income Tax: No, unless subsidiary reimburses parent. Social Insurance Contributions: No. None, provided no reimbursement and no recording of expense on local entity's books. Approval of Bank of Thailand required for subsidiary to remit funds for reimbursement. Cashnetting using book entries is prohibited Certain repatriation requirements apply to employees. Generally, no, but disclaimer recommended to reduce risk. Written consent from employees for the collection, use and transfer of data abroad is recommended. © 2017 Baker McKenzie. 119 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy Thailand Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Allowed up to a certain monetary threshold if subsidiary bears cost of the awards, board of directors of subsidiary approves reimbursement and subsidiary complies with exchange control requirements. Written reimbursement agreement advisable. Income Tax: Yes. Social Insurance Contributions: None. It is arguable whether the securities filing requirement that applies to stock-settled awards also applies to cash-settled awards. Even if applicable, no filing is required, provided no reimbursement and no recording of expense on local entity's books. Approval of Bank of Thailand required for subsidiary to remit funds for reimbursement. Cashnetting using book entries is prohibited Certain repatriation requirements apply to employees. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. Written consent from employees for the collection, use and transfer of data abroad is recommended. Turkey OPTION Tax treatment is unclear under Turkish law. Likely, no tax applies on grant, vesting or exercise provided the subsidiary does not reimburse the parent and take a tax deduction. Income tax on sale if no reimbursement by subsidiary/local deduction. Proposed law that will regulate tax of equity awards is temporarily on hold due to political situation in Turkey. If adopted as proposed, tax on spread at exercise and tax on sale. Yes, if subsidiary reimburses parent under a written reimbursement agreement. Income Tax: No, if subsidiary does not reimburse parent. Social Insurance Contribution: No, if subsidiary does not reimburse parent. Stock options should not be subject to prior clearance from the Capital Market Board provided that (i) the sale of shares does not take place in Turkey; (ii) information distributed to employees does not give the impression that the award is a public offering; and (iii) no other action that would qualify as a public offering is undertaken. If funds are remitted outside of Turkey to exercise options, the funds must be remitted through a bank licensed in Turkey. The sale or resale of shares traded on exchanges outside of Turkey by Turkish residents must be conducted through an intermediary institution licensed in Turkey. Provided the grant of options is based on objective criteria (i.e., performance or job category) and there is no reimbursement by subsidiary/local deduction, the benefits should not be considered part of an employee’s salary. Written disclaimer recommended to reduce risk of plan entitlement. Written consent to the collection, use and transfer of data abroad is recommended. Turkey ESPP Tax treatment is unclear under Turkish law. Likely, no tax on grant or purchase provided Yes, if subsidiary reimburses parent under a written reimbursement agreement. Income Tax: No, if subsidiary does not reimburse parent. Share purchase rights under an ESPP should not be subject to prior clearance from the Capital Market Board provided that (i) the sale of shares does not take place in Turkey; If funds are remitted outside of Turkey to purchase shares, the funds must be remitted through a bank Provided the grant of purchase rights is based on objective criteria (i.e., performance or job category) and there is no Written consent to the collection, use and transfer of data abroad is recommended. © 2017 Baker McKenzie. 120 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy the subsidiary does not reimburse the parent and take a tax deduction. Income tax on sale if no reimbursement by subsidiary/local deduction. Proposed law that will regulate tax of equity awards is temporarily on hold due to political situation in Turkey. If adopted as proposed, tax on discount at purchase and tax on sale. Social Insurance Contribution: No, if subsidiary does not reimburse parent. (ii) information distributed to employees does not give the impression that the award is a public offering; and (iii) no other action that would qualify as a public offering is undertaken. licensed in Turkey. The sale or resale of shares traded on exchanges outside of Turkey by Turkish residents must be conducted through an intermediary institution licensed in Turkey. reimbursement by subsidiary/local deduction, the benefits should not be considered part of an employee’s salary. Written disclaimer recommended to reduce risk of plan entitlement. Turkey RS/RSU Tax treatment is unclear under Turkish law. Likely, no tax on grant or vesting provided the subsidiary does not reimburse the parent and take a tax deduction. Income tax on sale if no reimbursement by subsidiary/local deduction. Proposed law that will regulate tax of equity awards is temporarily on hold due to political situation in Turkey. If adopted as proposed, tax at vesting on fair market value of the shares and tax on sale. Yes, if subsidiary reimburses parent under a written reimbursement agreement. Income Tax: No, if subsidiary does not reimburse parent. Social Insurance Contribution: No, if subsidiary does not reimburse parent. RS/RSUs awarded to employees should not be subject to prior clearance from the Capital Market Board provided that (i) the sale of shares does not take place in Turkey; (ii) information distributed to employees does not give the impression that the award is a public offering; and (iii) no other action that would qualify as a public offering is undertaken. The sale or resale of shares traded on exchanges outside of Turkey by Turkish residents must be conducted through an intermediary institution licensed in Turkey. Provided the grant of RS/RSUs is based on objective criteria (i.e., performance or job category) and there is no reimbursement by subsidiary/local deduction, the benefits should not be considered part of an employee’s salary. Written disclaimer recommended to reduce risk of plan entitlement. Written consent to the collection, use and transfer of data abroad is recommended. Turkey Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, if subsidiary bears the cost of award. Income Tax: Yes. Social Insurance Contributions: Yes, unless None. None. The payment will likely be considered part of salary for purposes of calculating the statutory severance compensation, unless the severance compensation threshold has been met. Written consent to the collection, use and transfer of data abroad is recommended. © 2017 Baker McKenzie. 121 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy contribution ceiling already met. Employer has to withhold the employee’s contribution. Ukraine OPTION N/A (see “Exchange Controls” section). Otherwise, likely tax on spread at exercise. Tax on sale. There is a risk that tax may be due on the entire sale proceeds resulting in double taxation of a portion of the gain. Uncertain. Income Tax: N/A (see “Exchange Controls” section). Otherwise, withholding and reporting by the subsidiary is not required, provided the subsidiary is not involved in the administration of the awards, the award income is not considered part of local compensation and the subsidiary does not reimburse parent for the cost of the awards. Social Insurance Contribution: N/A (see “Exchange Controls” section). Otherwise, no social insurance contributions are required, provided the subsidiary is not involved in the administration of the awards, the award income is not considered part of local compensation and the subsidiary does not reimburse parent for the cost of the awards. There is some risk that the offer of an option plan may be subject to registration with the Ukrainian Securities Commission. Any distribution of foreign securities in Ukraine would fall under the requirement for the issuer to obtain a decision of the Ukrainian Securities Commission if any agreements or transactions related to the transfer of title to the securities would be deemed concluded (or offered to be concluded) in the territory of Ukraine. Investment in foreign shares requires a license from the National Bank of Ukraine (the “NBU”) for ”investing abroad.” If the securities were to be credited to a securities account belonging to a Ukrainian employee, such employee would be required to obtain an individual license from the NBU for the “placement of currency values abroad” prior to such placement. In the past, the process for obtaining a placement license for employees in Ukraine was burdensome and not practical. The NBU, however, recently released guidelines relaxing the placement license requirements for certain Ukrainian residents such that residents are no longer required to obtain a placement license to receive shares into a non-Ukraine brokerage account. In addition, the Ukrainian government has been gradually relaxing foreign exchange restrictions such that it may be None. The employee’s written consent to the transfer of personal data must be obtained. © 2017 Baker McKenzie. 122 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy possible for employees to remit funds abroad for the purchase of foreign shares on the basis of an e-license. It is uncertain whether such a license can be obtained in practice. Options restricted to a cashless sell-all method of exercise may avoid this requirement. Contact Baker McKenzie for details. Ukraine ESPP N/A (see “Exchange Controls” section). Otherwise, likely tax on discount at purchase. Tax on sale. There is a risk that tax may be due on the entire sale proceeds resulting in double taxation of a portion of the gain. Uncertain. Income Tax: N/A (see "“Exchange Controls” section). Otherwise, withholding and reporting likely not required, provided the subsidiary is not involved in the administration of the awards, the award income is not considered part of local compensation and the subsidiary does not reimburse parent for the cost of the awards. Social Insurance Contribution: N/A (see “Exchange Controls” section). Otherwise, no social insurance contributions are required, provided the subsidiary is not involved in the administration of the awards, the award income is not considered part of There is some risk that the offer of purchase rights under an ESPP may be subject to registration with the Ukrainian Securities Commission. Any distribution of foreign securities in Ukraine would fall under the requirement for the issuer to obtain a decision of the Ukrainian Securities Commission if any agreements or transactions related to the transfer of title to the securities would be deemed concluded (or offered to be concluded) in the territory of Ukraine. Investment in foreign shares requires a license from National Bank of the Ukraine (the “NBU”) for “investing abroad.” If the securities were to be credited to a securities account belonging to a Ukrainian employee, such employee would be required to obtain an individual license from the NBU for the “placement of currency values abroad” prior to such placement. In the past, the process for obtaining a placement license for employees in Ukraine was burdensome and not practical. The NBU, however, recently released guidelines relaxing the placement license requirements for certain Ukrainian residents such that residents are no longer required to obtain a placement license to None. The employee’s written consent to the transfer of personal data must be obtained. © 2017 Baker McKenzie. 123 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy local compensation and the subsidiary does not reimburse parent for the cost of the awards. receive shares into a non-Ukraine brokerage account. In addition, the Ukrainian government has been gradually relaxing foreign exchange restrictions such that it may be possible for employees to remit funds abroad for the purchase of foreign shares on the basis of an e-license. It is uncertain whether such a license can be obtained in practice. Contact Baker McKenzie for details. Ukraine RS/RSU Tax likely 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. There is a risk that tax may be due on the entire sale proceeds resulting in double taxation of a portion of the gain. Uncertain. Income Tax: Withholding and reporting by the subsidiary is not required, provided the subsidiary is not involved in the administration of the awards, the award income is not considered part of local compensation and the subsidiary does not reimburse parent for the cost of the awards. Social Insurance Contribution: No social insurance contributions required, provided the subsidiary is not involved in the administration of the awards, the award income is not considered part of There is some risk that the offer of RS/RSUs may be subject to registration with Ukrainian Securities Commission. Any distribution of foreign securities in Ukraine would fall under the requirement for the issuer to obtain a decision of the Ukrainian Securities Commission if any agreements or transactions related to the transfer of title to the securities would be deemed concluded (or offered to be concluded) in the territory of Ukraine. None. None. The employee’s written consent to the transfer of personal data must be obtained. © 2017 Baker McKenzie. 124 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy local compensation and the subsidiary does not reimburse parent for the cost of the awards. Ukraine Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement recommended. Income Tax: The employer is required to withhold income tax. Reporting requirements apply. Social Insurance Contribution: Employee and employer social insurance contributions will apply at payment (employee contributions are subject to monthly contribution ceiling). The employer is required to withhold the employee portion (if applicable). Generally no, provided that the awards are paid in cash through local payroll. Generally none, provided that the awards are paid in cash through local payroll. None. The employee’s written consent to the transfer of personal data must be obtained. United Arab Emirates OPTION No income tax applies. Social insurance likely does not apply. In most cases, no income tax applies to local subsidiary. Therefore, a subsidiary tax deduction is generally not applicable. Income Tax: N/A Social Insurance Contribution: Withholding and reporting likely not required. Generally, none. However, if the company is incorporated or registered in the Dubai International Financial Centre, certain restrictions apply. None. Generally no; however, plan documentation should state that the grant is a "one time" or irregular benefit extended to the employee. Generally no; however, data protection laws apply to entities incorporated or registered in the Dubai International Financial Centre. The employee's prior written consent to the collection, use and transfer of data prior to grant should be obtained. United Arab Emirates ESPP No income tax applies. Social insurance likely does not apply. In most cases, no income tax applies to local subsidiary. Therefore, a subsidiary tax deduction is Income Tax: N/A Social Insurance Contribution: Generally, none. However, if the company is incorporated or registered in the Dubai International Financial Centre, certain restrictions apply. None. Generally no; however, plan documentation should state that the grant is a "one time" or irregular benefit extended to the employee. Generally no; however, data protection laws apply to entities incorporated or registered in the © 2017 Baker McKenzie. 125 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy generally not applicable. Withholding and reporting likely not required. Dubai International Financial Centre. The employee's prior written consent to the collection, use and transfer of data prior to grant should be obtained. United Arab Emirates RS/RSU No income tax applies. Social insurance likely does not apply. In most cases, no income tax applies to local subsidiary. Therefore, a subsidiary tax deduction is generally not applicable. Income Tax: N/A Social Insurance Contribution: Withholding and reporting likely not required. Generally, none. However, if the company is incorporated or registered in the Dubai International Financial Centre, certain restrictions apply. None. Generally no; however, plan documentation should state that the grant is a "one time" or irregular benefit extended to the employee. Generally no; however, data protection laws apply to entities incorporated or registered in the Dubai International Financial Centre. The employee's prior written consent to the collection, use and transfer of data prior to grant should be obtained. United Arab Emirates Cash Award No income tax applies. Social insurance likely does not apply. In most cases, no income tax applies to local subsidiary. Therefore, a subsidiary tax deduction is generally not applicable. Income Tax: N/A Social Insurance Contributions: Withholding and reporting likely not required. Generally, none. However, if the company is incorporated or registered in the Dubai International Financial Centre, certain restrictions apply. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount in termination indemnities, obligation to consult works council, etc. In the United Arab Emirates, entitlement risk is generally low; however, plan documentation should state that the grant is a "one time" or irregular benefit extended to the employee. Generally no; however, data protection laws apply to entities incorporated or registered in the Dubai International Financial Centre. The employee's prior written consent to the collection, use and transfer of data prior to grant should be obtained. United Kingdom OPTION Tax on spread at exercise. Tax-advantaged treatment is available for stock option plans (company share option Generally allowed without reimbursement by the subsidiary to the parent. Legislation affecting Income Tax: Required to report grant and taxable event. Companies must register employee share No securities law restrictions or obligations apply. Non-transferable stock options are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, None. Generally no, if right to terminate plan is reserved in writing. Discrimination against part-time employees is generally prohibited. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach © 2017 Baker McKenzie. 126 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy plan or for small, high risk companies, enterprise management incentive plan), resulting in tax deferral and/or exemption for employees up to a certain limit. Tax on sale, subject to annual exclusion. deductions taken on or after January 1, 2003 sets forth qualification criteria and limits deduction to employee’s taxable benefit. Administrative costs charged to UK subsidiary may be deducted only if a written reimbursement agreement has been executed. plans with HMRC. Withholding required. No withholding obligation at taxable event for privately held companies where shares not considered “readily convertible assets.” Annual share schemes return due by July 6th after the end of each UK tax year. Social Insurance Contributions: Yes, employee and employer contributions due at taxable event (uncapped). Employer may pass through employer contributions to employee by agreement or joint election (approved by HMRC). Employer is required to withhold employee’s contributions (including any assumed employer contributions). Please contact Baker McKenzie for joint election form. No social insurance contributions due at taxable event for awards issued by privately held companies where shares not considered “readily convertible assets.” the EU Prospectus Regulation. Despite the Brexit referendum in June 2016, the EU Prospectus Directive will continue to apply until the UK finalizes its withdrawal from the EU. Please contact Baker McKenzie for more information www.bakermckenzie.com/brexit/] The EU Council Directive 2000/78/EC prohibits age discrimination. The U.K. has adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 127 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy United Kingdom ESPP Tax on discount at purchase. Tax-advantaged treatment is available for certain stock purchase arrangements (SAYE, SIP), resulting in tax deferral and/or exemption for employees up to a certain limit. Tax on sale, subject to annual exclusion. Generally allowed without reimbursement by subsidiary to the parent. Legislation affecting deductions taken on or after January 1, 2003 sets forth qualification criteria and limits deduction to employee’s taxable benefit. Administrative costs charged to UK subsidiary may be deducted only if a written reimbursement agreement has been executed. Income Tax: Required to report grant and taxable event. Companies must register employee share plans with HMRC. Withholding required. No withholding obligation at taxable event for privately held companies where shares not considered “readily convertible assets.” Annual share schemes return due by July 6th after the end of each UK tax year. Social Insurance Contributions: Yes, employee and employer contributions due at taxable event (uncapped). Employer may pass through employer contributions to employee by agreement or joint election (approved by HMRC). Employer is required to withhold employee’s contributions (including any assumed employer contributions). Please contact Baker McKenzie for joint election form. No social insurance contributions due at taxable event for The EU Prospectus Directive impacts securities filing requirements in all European Economic Area countries, which includes all EU member states, Iceland, Liechtenstein and Norway ("EEA"). A new EU Prospectus Regulation will become fully effective as of July 21, 2019 and will replace the EU Prospectus Directive. ESPP is subject to the EU Prospectus Directive and will be subject to the EU Prospectus Regulation. In general, an EU-compliant prospectus will be required for the offering of an ESPP in any EEA member state unless an exemption or exclusion applies, but it is then possible to "passport" (or use) this prospectus in other EEA member states. Additional requirements may apply if a prospectus is filed or passported to a country or if relying on certain exemptions/exclusions. Under the EU Prospectus Regulation, an additional exemption that has not previously been available to many companies will become more broadly available. Contact Baker McKenzie for further details. Despite the Brexit referendum in June 2016, the EU Prospectus Directive will continue to apply until the UK finalizes its withdrawal from the EU. Please contact Baker McKenzie for more information www.bakermckenzie.com/brexit/] None. Generally no, if right to terminate plan is reserved in writing. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. The U.K. has adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. Written consent for A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 128 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy awards issued by privately held companies where shares not considered “readily convertible assets.” United Kingdom RS/RSU Tax at vesting for RS so long as restrictions lapse within five years; otherwise tax at grant. Employee could agree with employer to be taxed at grant of RS. Tax at vesting for RSU. Taxable amount is fair market value of the shares on the tax event. Tax on sale, subject to annual exclusion. Generally allowed without reimbursement by the subsidiary to the parent. Legislation affecting deductions taken on or after January 1, 2003 sets forth qualification criteria and limits deduction to employee’s taxable benefit. Administrative costs charged to UK subsidiary may be deducted only if a written reimbursement agreement has been executed. Income Tax: Required to report grant and taxable event. Companies must register employee share plans with HMRC. Withholding required. No withholding obligation at taxable event for privately held companies where shares not considered “readily convertible assets." Annual share schemes return due by July 6th after the end of each UK tax year. Social Insurance Contributions: Yes, employee and employer contributions due at taxable event (uncapped). Employer may pass through employer contributions to employee by agreement or joint election (approved by HMRC). Employer is required to withhold employee’s contributions (including any assumed employer contributions). Please contact Baker No securities law restrictions or obligations apply. Non-transferable free offers of RS/RSUs are not considered "transferable securities" for purposes of the EU Prospectus Directive or, its successor, the EU Prospectus Regulation. Despite the Brexit referendum in June 2016, the EU Prospectus Directive will continue to apply until the UK finalizes its withdrawal from the EU. Please contact Baker McKenzie for more information www.bakermckenzie.com/brexit/] None. Generally no, if right to terminate plan is reserved in writing. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. The U.K. has adopted local rules implementing this Directive, which may have an impact on design of equity and other incentive plans in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 129 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy McKenzie for joint election form. No social insurance contributions due at taxable event for awards issued by privately held companies where shares not considered “readily convertible assets.” United Kingdom Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Generally yes, because subsidiary bears the cost of award. Written agreement required. Income Tax: Withholding required. Social Insurance Contributions: Yes. Employer and employee contributions due and employer must withhold employee portion. None. None. Awards paid in cash through local payroll generally have increased plan entitlement risks, as well as other increased labor law risks such as the need to include amount when calculating termination indemnities, obligation to consult works council, etc. Discrimination against part-time employees is generally prohibited. The EU Council Directive 2000/78/EC prohibits age discrimination. The U.K. has adopted local rules implementing this Directive, which may have an impact on design of awards in the EU, particularly on age or age and service provisions which give different treatment (e.g., accelerated or continued vesting) for those meeting the criteria. A valid basis is required to collect, process and transfer personal data. Currently, the most common approach to data privacy compliance in connection with employee equity plans is to obtain a voluntary and informed consent. Other approaches may be feasible, depending on company-specific factors. Registration and notification requirements may also apply. A new EU Data Protection Regulation ("GDPR") will become effective on May 25, 2018 and companies should review data privacy compliance in advance of such date as the GDPR increases powers of data protection authorities, rights of data subjects and potential penalties. © 2017 Baker McKenzie. 130 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy United States OPTION Nonqualified Stock Options Tax on spread at exercise. Tax on sale of shares. Long-term capital gain rates apply if shares held more than 1 year. Incentive Stock Options: No tax on grant or exercise (except Alternative Minimum Tax may apply to spread at exercise). Tax on sale (generally, capital gain but ordinary income may apply to portion of gain up to spread at exercise if disqualifying disposition). Nonqualified Stock Options Yes, on spread at exercise. No reimbursement to parent required. Incentive Stock Options Only if disqualifying disposition. Nonqualified Stock Options Income Tax: Yes. Social Insurance Contribution: Yes, employer pays its share and withholds employee’s share. Incentive Stock Options Income Tax: No withholding. Reporting of exercise and disqualifying disposition of shares. Social Insurance Contributions: No. Nonqualified Stock Options Yes, but simple registration (Form S-8) applies for public company plans and exemptions are generally available for most private company plans. Incentive Stock Options Yes, but simple registration (Form S-8) applies for public company plans and exemptions are generally available for most private company plans. Nonqualified Stock Options No. Incentive Stock Options No. Nonqualified Stock Options No. Incentive Stock Options No. Nonqualified Stock Options Generally, no. Incentive Stock Options Generally, no. United States ESPP 423 Qualified ESPPs No tax at grant or purchase. At sale, generally a capital gain, but ordinary income applies as well for both qualifying and disqualifying dispositions. Non-Tax Qualified ESPPs Tax on discount at purchase. At sale, tax as longterm capital gain rates apply if shares held more than 1 year. 423 Qualified ESPPs Only if disqualifying disposition. Non-Tax Qualified ESPPs Yes, no reimbursement required. 423 Qualified ESPPs Income Tax: No withholding. Reporting of purchase and sale. Social Insurance Contribution: No. Non-Tax Qualified ESPPs Income Tax: Yes, on purchase. Social Insurance Contributions: Yes, employer pays its share and withholds employee's share. 423 Qualified ESPPs Yes, but simple registration (Form S-8) for public company plans and exemptions generally apply to most private company plans. Non-Tax Qualified ESPPs Yes, but simple registrations (Form S-8) applies for public company plans and exemptions are available for most private company plans. 423 Qualified ESPPs No. Non-Tax Qualified ESPPs No. 423 Qualified ESPPs No, but plan generally must cover all employees of parent and designated subsidiaries (part-time and seasonal employees can generally be excluded). Non-Tax Qualified ESPPs No. 423 Qualified ESPPs Generally, no. Non-Tax Qualified ESPPs Generally, no. © 2017 Baker McKenzie. 131 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy United States RS/RSU RS Tax at vesting. Employee may elect tax on grant under Section 83(b). Taxable amount is fair market value of the shares on the tax event (less any amount the employee pays for the shares). Tax on sale of shares. Long-term capital gain rates apply if shares held more than 1 year. RSU Tax when shares made available or delivered at or after vesting. Taxable amount is fair market value of the shares on the tax event (less any amount the employee pays for the shares). Tax on sale of shares. Long-term capital gain rates apply if shares held more than 1 year. Yes. No reimbursement required. Income Tax: Yes. Social Insurance Contribution: Yes. Employer pays its share and withholds employee’s share. Yes, but simple registration (Form S-8) applies for public company plans and exemptions are generally available for most private company plans. No. No. Generally, no. United States Cash Award SAR No tax at grant. Tax on the amount received by the employee at exercise (e.g., the spread). Phantom No tax at grant. Tax when cash is received upon vesting. Generally, yes, because the payment would be considered an ordinary and necessary business expense as compensation for personal services received by the employer. No reimbursement required. Income Tax: Yes. Social Insurance Contributions: Yes, employer pays its share and withholds employee's share. None. No. No. Generally, no. Vietnam OPTION Tax on the gain at exercise/sale. No. Income Tax: Taxable income is split into employment income and income The Vietnamese government issued a decree indicating offerings by foreign issuers to employees in Vietnam are possible if conditions on foreign exchange control are met and the Under Circular 10 issued by the State Bank of Vietnam (“SBV”), companies granting equity awards Likely none, provided the discretionary and occasional nature of the award is well documented and the award is not seen The employee’s written consent to the transfer of personal data should be obtained. © 2017 Baker McKenzie. 132 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy from securities. Withholding required on employment income portion. Official guidance regarding calculation of these income components is unclear. Social Insurance Contribution: No. securities issued to employees are not traded on Vietnamese securities markets. (See “Exchange Controls” section.) to Vietnamese nationals must obtain SBV approval to grant equity awards. As part of the registration, companies are required to establish an onshore bank account through which all funds towards the purchase and from the sale of shares under the plan must be funneled. Once registration is completed, quarterly reporting requirements apply. Repatriation of proceeds in connection with the awards is required. to be part of local employment arrangement. Vietnam ESPP Tax on the gain at sale. No. Income Tax: Taxable income is split into employment income and income from securities. Withholding required on employment income portion. Official guidance regarding calculation of these income components is unclear. Social Insurance Contribution: No. The Vietnamese government issued a decree indicating offerings by foreign issuers to employees in Vietnam are possible if conditions on foreign exchange control are met and the securities issued to employees are not traded on Vietnamese securities markets. However, the State Bank of Vietnam has never issued an approval for a foreign ESPP transaction. Under Circular 10 issued by the State Bank of Vietnam (“SBV”), companies granting equity awards to Vietnamese nationals must obtain SBV approval to grant equity awards. As part of the registration, companies are required to establish an onshore bank account through which all funds towards the purchase and from the sale of shares under the plan must be funneled. Once registration is completed, quarterly reporting requirements Likely none, provided the discretionary and occasional nature of the award is well documented and the award is not seen to be part of local employment arrangement. The employee’s written consent to the transfer of personal data should be obtained. © 2017 Baker McKenzie. 133 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy apply. Repatriation of proceeds in connection with the awards is required. Employees may be required to provide local entity with separate authorization form regarding payroll deductions made under an ESPP to enable local entity to remit payroll deductions out of Vietnam. Vietnam RS/RSU Tax on the gain at sale. No. Income Tax: Taxable income is split into employment income and income from securities. Withholding required on employment income portion. Official guidance regarding calculation of these income components is unclear. Social Insurance Contribution: No. The Vietnamese government issued a decree indicating offerings by foreign issuers to employees in Vietnam are possible if conditions on foreign exchange control are met and the securities issued to employees are not traded on Vietnamese securities markets. (See “Exchange Controls” section.) Also, it may be possible to structure RS/RSUs as cash-settled awards to avoid securities and foreign exchange law issues. Under Circular 10 issued by the State Bank of Vietnam (“SBV”), companies granting equity awards to Vietnamese nationals must obtain SBV approval to grant equity awards. As part of the registration, companies are required to establish an onshore bank account through which all funds towards the purchase and from the sale of shares under the plan must be funneled. Once registration is completed, quarterly reporting requirements apply. Repatriation of proceeds in connection with the awards is required. Likely none, provided the discretionary and occasional nature of the award is well documented and the award is not seen to be part of local employment arrangement. The employee’s written consent to the transfer of personal data should be obtained. © 2017 Baker McKenzie. 134 Country Taxation of Employee Sub Deduction Withholding and Reporting Securities Restrictions Exchange Controls Plan Entitlement Data Privacy SBV previously ruled that RSUs which can be settled only in cash fall outside of SBV authority. Vietnam Cash Award Taxed at payment. Taxable amount is amount of the cash payment. Cash award will be treated as employment income. Yes, because the local subsidiary bears the cost of award. Written agreement between the local subsidiary and the employee is required for tax purpose. Income Tax: The employer is required to withhold income tax on the amount of the cash payment to the employees. Reporting requirements apply. Compulsory Insurance (Social/Health and Unemployment Insurances) Contributions: No, provided that the cash payment is clearly defined as bonus. None. State Bank of Vietnam (“SBV”), previously ruled that RSUs which can be settled only in cash fall outside of SBV authority. Generally, there would be no risk if the employees do not hold or own any foreign shares at any time under their names, and foreign share prices at vesting are only used for calculation of cash payment. To avoid entitlement risk, it should be clearly provided that the awards are granted at the foreign parent company's discretion. The cash payment must be clearly provided as bonus. The employee’s written consent to the transfer of personal data must be obtained.
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