International Share Schemes
In today's global economy, the demand for executives to be internationally mobile increases and issues relating to the design and operation of plans in different jurisdictions come to the fore. In many cases, the requirements in one jurisdiction can clash with those in another.
Areas to be considered include:
Design features which are relevant in the UK will feature in other jurisdictions but often with different outcomes, covering.
- Will the delivery of equity be subject to tax at all?
- If so, when will the tax arise and at what rates?
- Will there be withholding and social security costs?
- Can the plan be structured to reduce the effective tax rate (e.g. by bringing awards within a capital rather than income tax regime)?
- Are there any forms of qualifying or approved plans similar to those in the UK which allow for a more favourable tax treatment?
- If so, what conditions need to be satisfied for the benefits to be obtained?
- Will corporate tax relief be available for the delivery of awards?
- If so, what conditions need to be satisfied to obtain the relief?
- Are there transaction taxes equivalent to UK stamp duty or VAT?
These and other issues should be reviewed in each jurisdiction where significant awards are likely to be made in order to ensure optimal plan design.
Once the plan is established and comes into operation, compliance issues will arise and will need to be managed. These include:
- Ensuring that income tax is withheld at the right time and at the right rate.
- Accounting for the tax due on a timely basis.
- Obtaining recovery from the participant and avoiding any gross up (tax on tax) issues.
- Accounting for social security taxes.
- Applying for and obtaining double tax treaty relief where appropriate.
- Making appropriate claims for corporate tax relief.
Corporate Law and Regulatory Requirements
As tax rules vary between different jurisdictions, so corporate law and regulatory requirements need to be considered on a country by country basis. These include:
- Determining whether any financial assistance to fund the acquisition of shares is permitted by local legislation;
- Considering any requirements relating to the contents of documentation issued to employees;
- Identifying and obtaining any consents or approvals required under the terms of local regulatory laws.
Allied to legal and regulatory requirements are the observance of local corporate governance requirements and expectations relating to award levels and structuring, continuing share ownership and the actions of Directors or other members of senior management who are privy to sensitive information.
How Pett Franklin can help
With our extensive experience working with share plans both within and outside the United Kingdom and our deep knowledge of UK requirements, we are familiar with the range of issues arising when implementing a share scheme internationally. This enables us to identify potential areas of difficulty and structure plans in a manner designed to minimise potential difficulties.
In addition, we have an extensive network of advisers globally with whom we are able to work to provide advice and review of plans as required.