Across the globe, governments are working to improve financial stability, resulting in additional efforts to increase tax revenue. This means that countries are looking to capture incorrectly reported income or insufficient tax remittance and also update the timing or method for income reporting and tax withholding. Equity compensation is often top on the list for countries looking increase tax revenue, which can lead to some pretty drastic changes (think Australia).

Canada 2010 Budget

In case you missed it, Canada’s 2010 Budget proposes changes that will tighten tax rules for stock options. There are two changes that together will have a large impact on the administration of stock option programs in Canada. First, employees will no longer be able to defer income from options exercises to sale date. Rather, income will be realized, reportable and taxed at the exercise. In addition, the “undue hardship” exception for income tax withholding on option exercise income will no longer be available after 2010, meaning the employers will now be required to withhold income tax on option exercises. Stock plan management teams will need to get started as soon as possible establishing new tax withholding procedures and communicating changes to employees. There’s more to the 2010 Budget as it relates to equity compensation. Find out all the details in this alert from Deloitte and make sure you’re signed up to receive updates as they come in.

Ireland 2010 Finance Bill

Prior to the 2010 Finance Bill, employers in Ireland were generally only required to report on the grant and exercise of stock options and ESPP; reporting stock-based awards like restricted stock and RSUs was only required upon notice by the Irish Revenue Commissioners. However, after the 2010 Finance Bill, employers in Ireland must now report on the grant and vesting of all forms of equity compensation including restricted stock and restricted stock units. For companies already reporting both at the request of the Revenue Commissioners, the good news from this Bill is that the forms for reporting equity compensation will be combined to a single form. Reporting is generally due by March 31, but because the composite form isn’t available yet, the filing deadline for 2009 reporting has been extended to July 9, 2010. For more information on the Finance Bill 2010, check out this alerts under the Ireland Country Guide.

Testing UK Residency in the Courts

We’ve also seen a few ground-breaking rulings regarding UK residency. If you have employees on assignment in the UK, these recent rulings mean that now is a good time to take a closer look at the residency status of mobile employees working in the UK or who have left the UK on assignment. The HMRC is in the process of reviewing residency claims. With these rulings (from litigation that is the product of the HMRC’s efforts), some existing assumptions about claiming non-resident status in the UK have been challenged. Residency has never been a concrete idea in the UK. Although there are definite and obvious lines that disqualify employees from claiming non-resident status, there is still a significant amount of grey area. When reviewing residency, the HMRC takes all facts and circumstances into account, which means that companies determining how to withhold and report must also assess each mobile employee individually.

For employees leaving the UK to work abroad, the most significant implication of two recent rulings is that it will be more of a challenge to claim non-resident status if there isn’t a clear break with social or family ties in the UK. For employees on assignment to the UK, one recent ruling implies that when reviewing cases where the status of resident and not ordinarily residence (see my prior entry on UK mobile employee vocabulary), the original intent of the individual can be trumped by the actual outcome of the assignment. You can find more on these recent rulings in the alerts under the UK Country Chapter Guide.

Keep Up!

Have you been keeping up with international developments? There’s a lot on the move these days, and to stay ahead of the curve, you need to know what’s going on. The NASPP Global Stock Plans portal taps into resources from all of our Task Force members to provide you the latest alerts on global legislation, litigation, and other changes that impact equity compensation. If you’re not already on the list to receive global alerts by e-mail, sign up now!

-Rachel