The NASPP Blog

Many companies are in the throes of year-end related activities. If your fiscal year ended on December 31, then you have the double duty of year-end financial reporting tasks combined with U.S. tax reporting requirements. Typically when I think about “year-end” and all the associated to-dos, things like W-2s, 1099s and participant communications are the first things that come to mind. In thinking further, I realize my perspective is a bit narrow. It’s a big world out there, and, for companies with employees outside of the U.S., there are additional reporting tasks associated with all the various non-U.S. jurisdictions that must be completed. In today’s blog I highlight some thoughts and tips for complying with year-end reporting requirements in non U.S. jurisdictions.

Thanks to a recent article published by Jones Day, available in our Global Stock Plans portal, I’ve been able to refresh my understanding on several key aspects of global year-end reporting compliance. I’ll focus on some general tips that came to my mind; country specific detail is available in the article and I’ll leave it to the law experts to share those tidbits.

It’s a Big World Out There

Yes, it’s true, the U.S. is not the only jurisdiction that requires year-end tax reporting related to stock plan transactions. I find that working in the U.S., it’s natural for us to be more intimately in the know when it comes to U.S. tax reporting compliance. However, as we know, there are many other locations that have similar reporting requirements. It’s important to understand which countries have existing legislation or measures and then formulate a plan to comply. Will a local resource be tasked with compliance? Will this be outsourced to a third party? Will corporate representatives facilitate such reporting?

Not All Tax Years Are Created Equal

One challenging aspect of managing stock compensation globally is the individuality of each global jurisdiction and their securities, tax, labor and other laws and requirements. These challenges remain consistent in the year-end reporting process as well. Not all tax years end on December 31. In fact, it’s common to see tax years ending in April, June and other parts of the year. For example, Australia’s tax year ends on June 30th. India’s tax year ends on March 31st. In some ways varied year-end dates may lessen the calendar year end burden placed upon stock administrators, payroll personnel, and others who work in managing global operations. However, it can be tricky to keep track of the multiple dates, deadlines and corresponding requirements. If you have employees with reportable transactions in multiple countries, you may want to create a global tax reporting calendar for the purpose of tracking important deadlines and requirements.

When You Assume…

There’s an expression about making assumptions, but in order to keep things professional I can’t write it here. If you’ve heard it, you know what I mean (and if you haven’t, I’ll be happy to share it with you offline). Anyhow, assumptions can lead to failures, and those of the compliance kind we certainly want to avoid. I’ve seen it happen many times – an assumption is made that local payroll is handling stock compensation related tax reporting. The problem? Payroll didn’t know they were supposed to do it, or, in some cases that there was even a requirement to report. Other possible vulnerabilities can be found in withholding rates (some locales have different rates for different situations, such as for current and terminated employees). While in many cases, local resources may know more about their own reporting requirements than those in the corporate office, it’s unwise to assume that everything will happen autonomously at the local level as intended. Even if you plan to have local resources handle the bulk of tax reporting and other year end compliance tasks, plug yourself in. Get involved and understand exactly what is being reported, for whom, and by when. This may involve internal business partners and external advisers with expertise in this area, and cross-communication is important.

Back to Work

I know we could talk for days about the extent and complexity of managing global stock plans, but alas it’s time to get back to work. I wish everyone a smooth year-end process, whenever that “year-end” may be.

– Jennifer