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  • Restricted stock and RSUs

    Securities

    As long as:

    • The offer is not advertised or publicized
    • The stock is not traded in Argentina
    • The offer is limited to employees
    • The offer is intended to compensate employees and not to raise capital, no securities law requirements apply

    Foreign exchange

    Since September 1, 2019, the Argentine government reenacted FX controls and regulations. These FX regulations are applicable to certain operations.  Notwithstanding there are no foreign exchange restrictions applicable to restricted stock or RSUs, local employees may face difficulties in purchasing the foreign currency if the options are in foreign currency, or to transfer money abroad.

    Tax

    Employee

    The employee is taxed on restricted stock upon grant and on RSUs upon vesting (may include personal assets tax).

    The employee is subject to a flat tax of 15% on any net gain resulting from the sale of the shares by Argentine Tax residents, or, alternatively, 13.5% on the gross sale price by non-residents.

    Employer

    Withholding & reporting

    Tax withholding and reporting are required upon grant for restricted stock and upon vesting of RSUs.

    Deduction

    Argentine subsidiaries are allowed to deduct the amount reimbursed to the parent company for the cost of the benefits if a Reimbursement or Recharge Agreement is in place.

    Social insurance

    Social insurance contributions are generally payable by the employee and employer.

    Data protection

    Obtaining an employee's written consent for the processing and transfer of his or her personal data is the most common approach to comply with certain aspects of data protection requirements. The employer also is required to register any database that includes an employee's personal data with the Argentine privacy authorities.

    Labor

    Benefits received from restricted stock or RSUs may be considered part of the employment relationship and included in a severance payment if the awards are repeatedly granted to an employee. Upon involuntary termination of employment, an employee may be entitled to continued vesting and other rights with respect to his or her award. In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of restricted stock or RSUs ceases upon termination of employment, and that the plan and any awards under it are discretionary.

    Communications

    Although plan materials are not required to be translated into Spanish, it is recommended, to ensure that employees understand the terms of their awards. Award materials should be addressed to individual employees in order to avoid securities law requirements.

  • Stock options

    Securities

    As long as:

    • The offer is not advertised or publicized
    • The stock is not traded in Argentina
    • The offer is limited to employees
    • The offer is intended to compensate employees and not to raise capital, no securities law requirements apply

    Foreign exchange

    Since September 1, 2019, the Argentine government reenacted FX controls and regulations. These FX regulations are applicable to certain operations.  Notwithstanding there are no foreign exchange restrictions applicable to restricted stock or RSUs, local employees may face difficulties in purchasing the foreign currency if the options are in foreign currency, or to transfer money abroad.

    Tax

    Employee

    The employee is taxed on the spread upon exercise (including personal assets tax, if applicable). 

    The employee is subject to a flat tax of 15% on any net gain resulting from the sale of the shares by Argentine Tax residents, or alternatively 13.5% on the gross sale price by non-residents.

    Employer

    Withholding & reporting

    Tax withholding and reporting are required upon exercise.

    Deduction

    Argentine subsidiaries are allowed to deduct the amount reimbursed to the parent company for the cost of the benefits if a Reimbursement or Recharge Agreement is in place.

    Social insurance

    Social insurance contributions are generally payable by the employee and employer when an option is exercised.

    Data protection

    Obtaining an employee's written consent for the processing and transfer of his or her personal data is the most common approach to comply with certain aspects of data protection requirements. The employer is also required to register any database that includes an employee's personal data with the Argentine privacy authorities.

    Labor

    Benefits received from an option may be considered part of the employment relationship and included in a severance payment if options are repeatedly granted to an employee. Upon involuntary termination of employment, an employee may be entitled to continued vesting and other rights with respect to his or her option. In order to reduce the risk of employee claims, the award agreement signed by an employee should provide, among other things, that vesting of an option ceases upon termination of employment, and that the plan and any awards under it are discretionary.

    Communications

    Although plan materials are not required to be translated into Spanish, it is recommended, to ensure that employees understand the terms of their awards. Award materials should be addressed to individual employees in order to avoid securities law requirements.

  • Stock purchase rights

    Securities

    As long as:

    • The offer is not advertised or publicized
    • The stock is not traded in Argentina
    • The offer is limited to employees
    • The offer is intended to compensate employees and not to raise capital, no securities law requirements apply

    Foreign exchange

    Since September 1, 2019, the Argentine government reenacted FX controls and regulations. These FX regulations are applicable to certain operations. Notwithstanding there are no foreign exchange restrictions applicable to restricted stock or RSUs, local employees may face difficulties in purchasing the foreign currency if the options are in foreign currency, or to transfer money abroad.

    Tax

    Employee

    The employee is taxed on the spread upon purchase.

    The employee is subject to a flat tax of 15% on any net gain resulting from the sale of the shares by Argentine Tax residents, or, alternatively, 13.5% on the gross sale price for non-residents.

    Employer

    Withholding & reporting

    Tax withholding and reporting are required upon purchase.

    Deduction

    Argentine subsidiaries are allowed to deduct the amount reimbursed to the parent company for the cost of the benefits if a Reimbursement or Recharge Agreement is in place.

    Social insurance

    Social insurance contributions are generally payable by the employee and employer when the shares are purchased.

    Data protection

    Obtaining an employee's written consent for the processing and transfer of his or her personal data is the most common approach to comply with certain aspects of data protection requirements. The employer also is required to register any database that includes an employee's personal data with the Argentine privacy authorities.

    Benefits received from a purchase right may be considered part of the employment relationship and included in a severance payment if purchase rights are repeatedly granted to an employee. Upon involuntary termination of employment, an employee may be entitled to continued participation in the plan. In order to reduce the risk of employee claims, the offer document signed by an employee should provide, among other things, that participation in the plan ceases upon termination of employment, and that the plan and any awards under it are discretionary.

    In light of restrictions on payroll deductions, alternative arrangements may be necessary for contributions to the plan.

    Labor

    Not applicable.

    Communications

    Although plan materials are not required to be translated into Spanish, it is recommended, to ensure that employees understand the terms of their awards. Award materials should be addressed to individual employees in order to avoid securities law requirements.

  • Key contacts
    Guillermo Cabanellas
    Guillermo Cabanellas
    Senior Partner DLA Piper (Argentina) [email protected] T +5411 41145500 View bio
    Augusto Nicolás Mancinelli
    Augusto Nicolás Mancinelli
    Partner DLA Piper (Argentina) [email protected] T +5411 41145500 View bio

Restricted stock and RSUs

Social insurance

Argentina

Social insurance contributions are generally payable by the employee and employer.

Australia

A Medicare levy is payable by the employee on restricted stock and RSUs. An additional Medicare levy surcharge may also be imposed on an employee.

Austria

Social insurance contributions are payable on restricted stock and RSUs, subject to a cap. Withholding is required.

Belgium

Traditionally, restricted stock and RSUs were not subject to social insurance contributions, provided at least they are not granted by the employer of the beneficiary.  Social security contributions are indeed only due on benefits "granted by the employer in the framework of the employment contract." The notion of "granting" was in this regard construed in a broad sense, and it covered: (a) the situations where the employer directly pays the benefit, (b) the situation where the employer indirectly pays the benefit because the parent company granting it charges the cost for doing so to the employer, and (c) the situation where the employer does not bear the financial cost of the benefit, but intervenes in the granting of the benefit.  Notably in its judgment of October 10, 2016, the Belgian Supreme Court decided that social security contributions are due if all costs of the benefit are paid by a third party, but the employer decides which person receives the benefit in question.

While the legislation was not changed, the National Office for Social Security now takes the view that the question who bears the financial burden of a benefit is not decisive, in the sense that social security contributions are definitively due if the financial burden is on the employer, but social security contributions can still be due if the financial burden is on the parent company of the employer.  The National Office for Social Security did not publish a clear test to be used in order to determine when social security contributions are due, but seems to take the position that social security contributions are due, unless it can be established that a benefit is granted outside the framework of the employment contract –for instance, in the framework of a shareholder agreement.

Brazil

Restricted stock and RSUs may be subject to social insurance contributions since it could be deemed employment income subject to such contributions.

Canada

Generally, social insurance contributions, which are based on an employee's compensation and are subject to a cap, are payable on restricted stock and RSUs.

Chile

Compensation derived from restricted stock units and RSU plans are subject to social security contributions if, together with the remaining remunerations payable to the eligible employee in the same month period, do not exceed the capped compensation that law states as a basis for social security calculations.  For instance, if the base salary of an eligible employee suffices the capped basis, compensation from the plans paid in the same period will not be subject to social security contributions as they are over the capped basis.  Otherwise, if compensation of the plan, together with the remaining remunerations payable in the month, is lower than the capped month basis, they shall trigger social security contribution payments.  In addition, should the benefits paid directly by the issuing company with no charge-back to the local employer, it is debatable whether they will trigger social security contributions obligations.

China

Social insurance contributions may be imposed on restricted stock and RSUs.

Colombia

If the stock is granted as a non-salary payment, it would not be included in the basis to calculate social security contributions, provided that such payments do not exceed 40 percent of the employees' total monthly compensation.  If these non-salary payments exceed 40 percent of the monthly compensation, the excess will be subject to social security contributions.

The basis to calculate contributions to the social security system (pensions, solidarity pension fund, health and professional risks) is the monthly salary earned by the employee.  If that monthly salary exceeds 25 times the minimum wage, contributions to the social security system will be calculated on the maximum basis of 25 times the minimum wage.

If an employee earns a so-called "integral salary," 70 percent of the employee's salary will be the basis to calculate contributions to the social security system.  However, if 70 percent of the integral salary is more than 25 times the minimum wage, contributions to the social security system will be calculated on the maximum basis of 25 times the minimum wage.

Czech Republic

Social security and health insurance contributions do not apply provided that:

  • The Czech employer is not responsible for the costs of the plan (ie, there is no reimbursement of costs)
  • Shares of the Czech employer are not included in the plan and
  • Payments are not made through the Czech employer.

Denmark

Restricted stock and RSUs are subject to Danish labor market contribution when taxed as salary income. Spread taxed as capital gains is not subjected to labor market contribution.

Ecuador

Restricted stock and RSUs may be subject to social insurance contributions.

Egypt

Restricted stock and RSUs are not subject to social insurance obligations.

Finland

Restricted stock and RSUs are not subject to social insurance contributions.

France

Employee

For Restricted Stock and RSUs granted pursuant to a plan authorized as of 01/01/2018

An acquisition gain below €300,000 is subject to social contributions (ie, CSG-CRDS) at a global rate of 17.2 percent, including 3.4 percent deductible from taxable income.

An acquisition gain above €300,000 is subject to social contributions at a global rate of 9.7 percent, including 6.8 percent deductible from taxable income.  It is also subject to an employee social contribution at a rate of 10 percent.

Capital gain is subject to social contributions at a global rate of 17.2 percent.

Employer

For Restricted Stock and RSUs granted pursuant to a plan authorized as of 01/01/2018

The employer will be subject to a contribution to the social security scheme (contribution sociale patronale) of 20 percent which is payable within a month following the acquisition date of the shares.

Small and medium enterprises (SMEs) may be exempt from the payment of the employer's contribution.

Tax and social regime applicable to non-qualifying plans

The gains realized upon the vesting of RSUs granted pursuant to non-qualifying plans are treated as salary for tax and social purposes.

As such, vesting gains are subject to the progressive scale of income tax (with a maximum rate of 45 percent) and to a special 3- to 4-percent surtax on high income.  As from 2019, income tax on non-qualifying plans are withheld by employers, who are also in charge of withholding income tax on salaries.

From a social standpoint, employer social security charges are due at a maximum rate of approximately 45 percent and employee social security charges are due at a maximum rate of approximately 25 percent, including 22.1 percent deductible for income tax purposes.  Both employer and employee social charges are withheld by the employing entity.

Germany

Restricted stock and RSUs are subject to social insurance obligations, up to a cap.

Greece

Typically, according to the existing social security legislation, restricted stock and RSUs are subject to social insurance at vesting.  However, a new social security reform is anticipated very soon and, therefore, given that there were recent changes in the tax treatment of the aforementioned benefits, similar changes may also arise in the social security treatment of same.

Hong Kong, SAR

Not applicable for this jurisdiction.

Hungary

Generally, the employee must pay social insurance/health tax on the taxable amount.

India

Social insurance generally is not applicable to restricted stock and RSU benefits.

Indonesia

Unless the parent company is reimbursed by the subsidiary for restricted stock and RSU benefits that are routinely granted, such benefits generally are not subject to social insurance contributions.

Ireland

Restricted stock and RSUs are subject to employee’s PRSI. Employer’s PRSI should not apply unless the award is cash-settled.

Israel

Portions of the taxable amount are subject to social insurance contributions, depending on whether the income is classified as ordinary income or capital gains.

Italy

Restricted stock and RSUs are generally not subject to social insurance. However, a case-by-case analysis is recommended.

Japan

Restricted stock and RSUs are not subject to social insurance contributions as long as the awards are not considered part of the employee's salary.

Malaysia

There is no social insurance scheme per se for Malaysia but there is a mandatory requirement for contributions to the Employees' Provident Fund (EPF) and Social Security Organization (SOCSO) for all employees who are Malaysian citizens. The requirement to contribute is based on a percentage of wages. So far as the plan is carved out and not made a term of the employment contract and does not form part of wages, there is no requirement to contribute to EPF or SOCSO based on the employee's entitlement to the stocks.

Mexico

Restricted stock and RSUs are likely subject to social insurance contributions if the Mexican subsidiary reimburses the parent company for the cost of the award benefits.

Netherlands

Social insurance contributions are imposed on restricted stock and RSU benefits to the extent that the employee's annual employment income has not yet exceeded the maximum income base for social security premiums.

New Zealand

New Zealand does not operate a general social insurance regime.

Nigeria

Social insurance contributions are generally payable by the employer and the employee. However, there are no specific requirements for social insurance contributions in relation to employee share and stock options.

Norway

Restricted stock and RSUs are subject to social insurance contributions.

Philippines

Unless the parent company is reimbursed by the Philippine subsidiary for restricted stock or RSU benefits, such benefits generally are not subject to social insurance contributions.

Poland

Unless the subsidiary is involved in the offer of restricted stock or RSUs, or reimburses the parent company, the benefits from the awards are generally not subject to social insurance contributions.

Portugal

Employers and employees make monthly social security contributions based on monthly earnings – as a rule, 23.75 percent of the relevant retribution for the employer and 11 percent for the employee.  Ownership of securities is not taken into consideration to calculate said contribution, unless it is considered part of the employee’s remuneration.

Russia

Unless the offer of restricted stock and RSUs is deemed to be an employment benefit, they generally are not subject to social insurance contributions.

Saudi Arabia

Generally, the benefit is unlikely to be subject to social insurance contributions.

Singapore

Restricted stock and RSUs generally are not subject to social insurance contributions.

Slovak Republic

Restricted stock and RSU benefits are generally subject to social insurance contributions and employee health insurance contributions.

South Africa

Restricted stock and RSUs generally are subject to social insurance contributions.

South Korea

Restricted stock and RSUs are generally subject to social insurance contributions upon vesting.

Spain

Restricted stock and RSUs are subject to social insurance contributions, subject to the general ceiling exemptions.

Sweden

Restricted stock and RSUs are subject to social insurance contributions.

Switzerland

Restricted stock and RSUs are subject to social insurance.

Taiwan, China

Restricted stock and RSUs are generally not subject to social insurance contributions.

Thailand

Restricted stock and RSUs are generally not subject to social insurance contributions.

Turkey

Restricted stock and RSUs are subject to social insurance contributions.

United Kingdom

Restricted stock and RSUs are subject to National Insurance Contributions (NICs), if shares are "readily convertible assets."

In the case of RSUs, through an approved Joint Election or other contractual arrangement, the employer's NICs obligation may be transferred from the employer to the employee.

Venezuela

Restricted stock and RSUs are not subject to social insurance.

Vietnam

Restricted stock and RSUs generally are not subject to social insurance contributions.