Are you staying current with international developments that may impact your company’s equity compensation program? You will find many essential tools in the NASPP Global Stock Plans portal to keep up-to-date. If you haven’t browsed through the portal recently, you really need to check out our latest feature; the Stock Plan Compliance Evaluation tool.
The Stock Plan Compliance Evaluation tool is available only to NASPP members. To access, click on the link that is under the Country Guides on the NASPP Global Stock Plans portal. This evaluation tool, provided by GlobalSharePlans, is a fantastic interactive tool that you can use to evaluate your international stock plans. By choosing your countries of interest, you can get an instant overview of the potential issues to be aware of. If you are seeking greater detail, head to the “Plan design by country” drop-down and run a personalized healthcheck on your plans by including applicable details. The Stock Plan Compliance Evaluation tool may be available this year only, so take advantage now!
We also continue to get regular updates to our Country Guides, Alerts, Articles, and Quarterly Updates. If you don’t already, sign up now to receive country alerts. You can subscribe to receive alerts for just the countries your company does business in, or all countries on the list! And, here’s a tip you may not be aware of: you can search the archive for alerts on a particular topic, or find a summary of individual country alerts in each Country Guide link. Here is an alert that recently caught my eye:
Korea: The Korean government recently updated its position on the deductibility of employee stock options costs to a Korean subsidiary or branch. The Korean subsidiary or branch will now be able to deduct the costs associated with employee stock options issued by a foreign parent company as long as the subsidiary incurred the costs directly or through a recharge agreement. Because of this new position, when the Korean subsidiary or branch bares the cost of employee stock options, the employee’s stock option income will be subject to income tax and social security tax withholding. Additionally, the Korean government clarified that in many cases, the income assessed and subsequent tax withholding on income from stock options earned by mobile employees will be calculated pro-rata for the time spent in Korea.
Our Global Stock Plans portal Task Force Members regularly contribute in-depth articles and quarterly newsletters. Valerie Diamond and Barbara Klementz from Baker & McKenzie recently contributed the “Top 10 Things You Need to Know for Option Exchanges Involving International Employees”. A great reminder included in this valuable list is that there are countries where the employee and/or the local entity have had to pay taxes on the options at grant. Additionally, it is likely that neither the employee nor the local entity may be able to obtain a refund or tax credit and will owe taxes again at grant for the new option.
Don’t miss out on the latest developments; be sure to put a regular review of the NASPP Global Stock Plans portal on your schedule!
Tags: country alerts, Global Stock Plans, international plan design, Restricted Stock Award, Restricted Stock Unit, stock option
Anecdotal evidence suggests that most stock plan administrators have been handed their international equity compensation programs and asked to find a way to administer them. However, the increasing complexity in the international regulatory environment and increased scrutiny over international stock plans is providing a platform for stock plan administrators to be active participants in the redesign of international programs, if not in their initial implementation. If you have not already, you should put a review of your international plans in as part of your year-end processes.
Here are the top five areas to review:
- Scope How broad-based were your international plans intended to be? Are you still focusing on the same audience, and does that still make sense for your employee population in that area? Take some time to review your grant processes for your international employees to confirm that the programs you are using still fit the current population.
- Exchange Controls Exchange controls are a government’s regulation on the flow of money and securities in and out of the country. You will want to confirm that your plans do (or still do) conform to the exchange controls of the countries in which you are offering equity compensation. One exchange control update that has been the source of attention, concerns, and updates is China’s SAFE requirements detailed in Circular 78.
- Securities Laws Securities laws are regulations pertaining to the public sale of securities. Offering shares of stock to employees through equity compensation programs may require filings with the country in which the programs are administered. The most common international filing exemption is for offerings involving a limited number of employees. If you were relying on this exemption, pay special attention to the scope of your plans to make sure that if you are aware of when you exceed the maximum number.
- Labor Laws Labor laws are established to protect employees; they may be federal or local. One of the most sensitive issues under labor laws is the idea of entitlement. In reviewing your current programs, you will want to confirm that your HR policies (as they relate to equity compensation) comply with each country’s labor laws (e.g.; change in employee status, annual grant practices, etc.). Also, you will want to confirm any risk for the company if you are considering a change in your equity programs.
- Taxation Employer and employee taxes may change each year. It’s important to note that not all countries follow a January – December tax year. You will want to do a year-end review of taxation for each country; adjusting the review period for the appropriate year-end timeframe for each country. Also, don’t forget about corporate taxes! You will want to review your corporate structure with regard to your local subsidiaries and confirm that your deductions and/or reimbursements are compliant.
In addition to regular alerts, articles, and quarterly updates available on the Global Stock Plans Portal, here are some important materials you may have missed:
- Introductory Materials to the Country Guides: There are currently 27 individual Country Guides available (stay tuned for more in January 2009!). The Introductory Materials from Jones Day will help guide you on what issues to consider as well as show you how to take full advantage of the guides.
- Global Employee Stock Plan Compliance Matrix: This matrix by Baker & McKenzie highlights selected international tax and legal consequences associated with stock plans in 36 countries including the top five issues above as well as data privacy.
- Plan Design Issues by Country: This concise matrix by GlobalSharePlans provides alerts for plan design considerations in 37 countries including specials risks, unusual requirements, and translation considerations. Keep an eye out for a special interactive tool that GlobalSharePlans will be sharing with NASPP members in early 2009!
- Global Desk Reference for Stock Options, Restricted Stock and RSUs, Stock Purchase Plans, and Data Privacy: DLA Piper provides this Global Desk Reference set. Each one offers a snapshot of top issues in up to 49 countries including my top five issues, data protection, and communications issues.
- Countries at a Glance for Stock Options, Restricted Stock and RSUs, Stock Purchase Plans, and Data Privacy: These country overviews by White & Case detail the employment, regulatory, and tax issues for 43 countries.
If you aren’t already, don’t forget to subscribe to the country alerts so that you can receive any breaking news on the countries relevant to your company’s stock plans.
Also, if you want to see what international plan design looked like in 2006, you can review our 2006 International Stock Plan Design Survey. We have just launched our new International Design and Administration Survey, co-sponsored again by Deloitte. It is the most comprehensive survey on all aspects of stock plan administration in the industry. Don’t miss out on your chance to participate in the survey and keep an eye out for the results in 2009!
Tags: international plan design