Global Tax and Regulatory Update: August 2019


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COUNTRY UPDATES

Flag of Isreal Israel: Section 102 – Tax Favored Plan

The District Court of Nazareth has recently issued a significant ruling regarding compliance with Section 102 of the Israeli Income Tax Ordinance [New Version] 5721-1961. The ruling, which is expected to be appealed by the Israeli Tax Authority (“ITA”), addressed a number of important issues in connection with the interpretation of Section 102 of the Ordinance.

First, the Court determined that Section 102 can apply to any class of shares under the “capital gains track” of Section 102 without requiring the issuer to obtain a pre-ruling from the ITA.

Second, the Court ruled that once an issuer submits an equity plan to the ITA and receives approval from the assessing officer (or is deemed to obtain approval where no objection is received within 90 days of filing), they cannot subsequently claim the plan is not compliant with Section 102 unless the terms of the plan are blatantly opposed to the provisions of Section 102.

Third, the Court confirmed that cash dividends paid on shares taxed pursuant to the “capital gains route” will be subject to tax at 25%, including when the dividends are paid during the two-year holding period.

Fourth, the Court also rejected the ITA’s claim that the fact that an equity plan is classified as a liability under Generally Accepted Accounting Principles (i.e. subject to variable accounting) precludes the awards from enjoying the benefits of the capital gains track.

Finally, the Court determined that, contrary to ITA policy, shares that are automatically forfeited upon termination of employment, or may be forfeited at the employer’s discretion upon such termination, can still be eligible for the favorable tax treatment available under Section 102.

Pending an anticipated appeal by the ITA, issuers should anticipate closer review by the ITA of any new plans being filed, as well as potential objections to various provisions which have commonly been in use in such arrangements.

Our Global Compliance Law Firm, Yair & Benjamini, in Israel will be happy to provide with more information. For more information feel free to reach out to Yair Benjamini at yair@benjamini-law.com

 

Shareworks Global Intelligence Comment:

We recommend companies and share plan administrators continue to monitor these developments. Please contact us if you need further assistance in this regard.

Luxembourg Flag Luxembourg: Minimum Wage Tax Credit

Effective January 1, 2019, eligible employees may benefit from the minimum wage tax credit (Crédit d’impôt salaire social minimum) if their monthly salary is between EUR 1,500 and EUR 3,000 The credit is EUR 70 for salaries ranging between EUR 1,500 and EUR 2,500. For salaries ranging between EUR 2,500 and EUR 3,000, the benefit is calculated as follows:

Monthly social salary credit = 70/500 * (3,000 – the gross monthly salary)

Our Global Compliance Law Firm, Vandenbulke Law, in Luxembourg will be happy to provide you with more information. For more information feel free to reach out to Denis Van den Bulke at dv@vdblaw.com

 

Shareworks Global Intelligence Comment:

We recommend companies review this information. Please contact us if you need further assistance in this regard.

Pakistan Flag Pakistan: Fiscal Budget 2019/2020

On June 11, 2019, the Minister of State for Revenue presented the Budget for the fiscal year 2019/2020 which became effective July 1, 2019. Certain key amendments to the personal income tax law are as follows:

  • The definition of resident has been amended to include a person present in Pakistan for a period or periods totaling 90 days or more in the tax year. A person will also be considered a tax resident who has been present in Pakistan for a period or periods totaling 365 days or more in the four years preceding the tax year.
  • The threshold of taxable income has been increased to PKR 600,000 for salaried persons.
  • Income tax rates for individuals whose salary income exceeds 75% of their taxable income will be as follows:
Yearly Taxable Income (PKR) Rate (%)
0 – 600,000 0
600,001 – 1,200,000 5
1,200,001 – 1,800,000 10
1,800,001 – 2,500,000 15
2,500,001 – 3,500,000 17.5
3,500,001 – 5,000,000 20
5,000,001 – 8,000,000 22.5
8,000,001 – 12,000,000 25
12,000,001 – 30,000,000 27.5
30,000,001 – 50,000,000 30
50,000,001 – 75,000,000 32.5
75,000,001 – 35

Our Global Compliance Law Firm, Surridge & Beecheno, in Pakistan will be happy to provide more information. For more information feel free to reach out to Khalid A. Rehman at khalidrehman@surridgeandbeecheno.com

 

Shareworks Global Intelligence Comment:

We recommend companies review and adjust accordingly. Please contact us if you need further assistance.

Poland Flag Poland: Proposal of Changes to Individual Tax Regime

The Polish Ministry of Finance has published a proposal to amend the individual income tax regime which includes: 1) a decrease in the income tax rate for certain taxpayers, 2) an increase in the personal allowance, and 3) tax relief for young employees.

There will be a 1% reduction in the income tax rate to 17% for individuals whose income is below PLN 42,764 in any tax year. The annual individual tax standard deduction from income from dependent services is proposed to be increased from PLN 1,335 to PLN 3,000. Both of these changes are expected to enter into force on January 1, 2020.

Finally, employees under 26 years of age will be entitled to an income tax exemption where their annual income does not exceed PLN 42,764. This provision is expected to become effective on October 1, 2019.

 

Shareworks Global Intelligence Comment:

We recommend companies review this information. Please contact us if you need further assistance in this regard.

Portugal Flag Portugal: Former Tax Resident Regime

Effective January 1, 2019, 50% of employment, business, and professional income is excluded from income taxation in Portugal for former taxpayers who become tax residents again in 2019 or 2020. All of the following conditions must be satisfied in order to benefit from this  tax exemption:

  • the taxpayer was a tax resident before 31 December 2015;
  • the taxpayer was not a tax resident in 2016, 2017 or 2018;
  • the taxpayer will be a tax resident again in 2019 or 2020;
  • the taxpayer has not applied for the non-habitual residence status; and
  • the taxpayer’s tax situation is regularized in the years during which the regime is applicable.

Taxpayers earning income from employment are required to present a declaration to their employer stating that the regime applies to allow the employer to withhold tax on only 50% of the amount otherwise subject to tax withholding.

 

Shareworks Global Intelligence Comment:

We recommend companies review this information. Please contact us if you need further assistance in this regard.

Russian Flag Russia: Proposal to Amend Definition of Tax Resident Individual

The Russian Ministry of Finance has proposed to amend the criteria for an individual to be considered a tax resident.

If the proposal is approved, an individual will be deemed to be a Russian resident (and subject to general individual taxation rules) if:

  • He or she is physically present in Russia for at least 90 days during a calendar year (currently, the 183-day residency test applies); or
  • His or her “center of vital interest” (i.e., place of permanent residence, employment, etc.) is in Russia.

Our Global Compliance Law Firm, ALRUD, will be happy to provide more information. For more information feel free to reach out to Olga Pimanova at opimanova@alrud.com

 

Shareworks Global Intelligence Comment:

We recommend companies continue to monitor these developments. Please contact us if you need further assistance in this regard.

UPCOMING FILING AND REPORTING

India Flag India: Annual Report

September 30, 2019
Affects: Local Company

Indian employers relying on the terms of the Genera Permission enacted by the Reserve Bank of India (RBI) must file an annual report with the RBI providing details regarding the shares issued to residents of India, the number of employees who received the shares, the amount of funds remitted for the purchase of shares and amounts remitted on account of recharge arrangements, if any, during the previous tax year on a specified form. Companies are advised to file the report by September 30 at the latest.

 

Our collaborating law firm in India (Little & Co.) is happy to assist, should you need any support with this.

 

China Flag China: SAFE Quarterly Reports

October 3, 2019
Affects: Local Company

Companies that have obtained SAFE approval for their equity plans in China are required to file quarterly reports with their local SAFE office within three business days at the end of the relevant quarter.

 

Our collaborating law firm in China (Martin Hu & Partners (MHP)) is happy to assist, should you need any support with this.

 

Saudi Arabia Flag Saudi Arabia: Quarterly Equity Reporting

October 10, 2019
Affects: Parent Company

Companies offering share plans to employees in Saudi Arabia under the new securities law exemption must notify the Capital Market Authority (“CMA”) within 10 days after the end of the quarter following grant disclosing the total number and value of all offers made to employees during the preceding quarter. This notification can be made by an authorised person or by the company. The company should also review any plan amendments or changes to determine whether any additional filings with the CMA may be required.

 

India Flag India: Indian Employer Tax Filings

October 15, 2019
Affects: Local Company

Indian employers are required to file Form 24Q with the Indian tax authorities on a quarterly basis. These quarterly returns report information on employment income paid to employees (including from share-settled awards) as well as taxes withheld.

The quarterly returns must be submitted by:

  • May 31 for the quarter ending March 31
  • July 31 for the quarter ending June 30
  • October 31 for the quarter ending September 30
  • January 31 for the quarter ending December 31

 

Our collaborating law firm in India (Little & Co.) is happy to assist, should you need any support with this.

 

UPCOMING EVENTS

27th Annual NASPP Conference and Exhibition

September 16-19, 2019

Plan to be part of the leading event in equity compensation as it gathers nearly 2,000 of your fellow stock plan professionals for four days of unbeatable opportunities for education, peer-to-peer community building, and discovery of effective solutions for the professional challenges you face.

Engage with more than 200 industry experts as they lead almost 100 sessions designed to provide you with essential guidance on major regulatory and economic developments, and the latest best practices in compensation, strategy, design, administration, communication, and more.

The Solium Team will be there!

We will be presenting:

Darren Smith will also be attending this event. Get in contact!

 

More info: https://www.naspp.com/Conference/Annual-Conference/27th-Annual-NASPP-Conference

Australia Regional Event

September 24, 2019

GEO is delighted to present the 2019 Australia Regional Events — dedicated to Australian equity compensation in Sydney.

This unique event brings forward-thinking equity and executive compensation discussions to an intimate gathering of innovators, issuers, suppliers and thought leaders.

 

More info: https://www.globalequity.org/geo/AUS2019-Sydney

Australia Regional Event

September 26, 2019

GEO is delighted to present the 2019 Australia Regional Events — dedicated to Australian equity compensation in Melbourne

This unique event brings forward-thinking equity and executive compensation discussions to an intimate gathering of innovators, issuers, suppliers and thought leaders.

 

More info: https://www.globalequity.org/geo/AUS2019-Melbourne

Proshare Annual Conference

October 03, 2019

The 2018 Annual Conference attracted 375 share plans industry professionals and providers, covering all of the essential hot topics, plus abundant networking and business development opportunities.

The Solium Team will be there!

We will be presenting:

  • Improve Your ‘Tech’ Life, by June Davenport. Using Technology to Save Time and Money, and Reduce Global Share Plan Compliance Risk. Get in contact!

 

More info: https://www.proshare.org/events

GEO’s 2019 Americas Regional Conference

October 21-23, 2019

Mark your calendars for this not-to-be-missed three-day event, which is known for bringing together strategic-minded individuals who are leaders in their fields and involved in the design and management of executive compensation and employee share plans as well as the providers that serve them.

GEO’s America’s Regional Conference (formerly NECF) is known for bringing together strategic-minded attendees who are knowledgeable about employee share plans and interested in topics that address current issues vital to the application of equity in all of its core disciplines. The America’s Regional Conference provides industry-leading education and networking opportunities in an inviting and relaxed environment, allowing attendees ample time to network with existing contacts and make new ones!

The Solium Team will be there!

June Davenport will be attending this event. Get in contact!

 

More info: https://www.globalequity.org/geo/ARC2019

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