Recent legislative updates

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1 Global equity compensation newsletter / Issue 3 / March 2016 Country summaries p1/ Country discussions p3 / Let s talk p5 Recent legislative updates This month's issue addresses recent changes in various jurisdictions, namely: Australia Changes to 2016 employee share scheme reporting Brazil New esocial reporting obligation to impact mobility process India 2016 proposals set to increase mobility program costs Ireland Form RSS1 due by March 31 Japan Employer reporting requirement due March 31 Country summaries Australia Changes to 2016 Employee Share Scheme reporting The Australian Taxation Office (ATO) announced a number of changes to the Employee Share Scheme (ESS) reporting requirements. Changes include a new ESS reporting lodgment process and reporting for international mobile employees. The lodgment dates remain the same; employers are required to file an ESS annual report with the ATO by August 14, 2016 and employers are required to provide employees with ESS statements by July 14, Please refer to the Country discussions section for more information about the changes.

2 Brazil New esocial reporting obligation to impact mobility process In an attempt to streamline its data collection processes, the Brazilian Tax Authorities launched the esocial reporting obligation. esocial is meant to be a standardized and centralized system that contains labor, social security and tax information regarding employees and independent contractors. It is expected to affect processes used for seconded employees. esocial reporting will be required starting September Next steps for companies to start preparing for esocial reporting compliance include conducting a thorough analysis of current internal process and making the necessary adjustments in order to fulfill the local legislation and application tool s requirements. India 2016 Budget proposal set to increase mobility costs On February 29, 2016, the Government presented the Union Budget for fiscal year The key features of the proposal affecting personal taxation and potentially impacting globally mobile employees will be discussed below. Examples of the possible changes include an increase in the surcharge and changes in the taxation of social security payments at the time of contribution and withdrawal. Please refer to the Country discussions section for more information about the changes. Ireland Upcoming online filing requirements for Form RSS1 due by March 31 As a reminder, companies with employees participating in stock option plans in Ireland are subject to upcoming annual reporting requirements. Specifically, RSS1 forms for the 2015 tax year has been released by the Irish tax authorities and must be filed via Revenue s Online System (ROS) by March 31, (For other types of awards which tax withholding and reporting is required when the taxable event occurs such as restricted stock units, annual reporting on form RSS1 is not required.) Japan Upcoming employer reporting requirement for equity award income due March 31 As a reminder, Japanese employers must report the income recognized from foreign share plan awards (i.e., stock options, restricted stock units, etc.) in 2015 to the tax authorities by March 31, This requirement applies to Japanese subsidiaries owned 50% or more by a foreign entity that provides equity awards to employees or directors resident in Japan. 2 PwC

3 Country discussions Australia Changes to 2016 employee share scheme reporting The new ESS annual report lodgment process will significantly impact foreign multinationals who previously satisfied ESS reporting requirements by submitting paper or Bulk Load Excel Spreadsheets. Starting in 2016, employers will be able to lodge ESS annual reports depending upon the number of participants: Employers up to 20 participants can use an ESS online form (which will be available soon) Employers with more than 20 participants must use software that meets the ATO s ESS electronic reporting specifications (which have not been released yet). It is important to note that the new ATO s ESS electronic reporting system does not relieve the employer of their obligation to provide employees with ESS statements by July 14, The deadline to file ESS annual reports is August 14, Reporting for internationally mobile employees has also become more stringent. Historically, employers had the choice of reporting either: The actual assessable amount of the discount (after taking into account the foreign service), or The gross discount. Employers are now required to disclose whether the amount reported in the annual report is the gross or assessable ESS amount. As a reminder, the ATO is continuing to data match the ESS reporting information from employers against the ESS income on the employee s income tax returns. It is important to communicate to employees how the reportable amount was determined and to indicate if the gross or assessable amount was reported. Please follow the link here to PwC s Global Mobility Insights article to read more. India 2016 Budget proposal set to increase mobility costs On February 29, 2016, the Government presented the Union Budget for fiscal year The proposal includes an increase in the surcharge and changes in the taxation of social security payments, which could potentially affect mobile employees. The key proposals of interest include: Income tax rates: Currently, the surcharge is 12% for individuals earning total income in excess of INR 10 million. It is expected to increase by 3%, which will result in an effective maximum marginal tax rate of 35.54% (up from 34.61%). Taxation of dividends: the budget proposes to tax dividends received by resident individuals at 10% where the amount of dividend received is above INR 1 million. Presently dividends are exempt from tax. Taxation of contributions to Indian Social Security: Currently, an employers contributions to the Indian Social Security up to 12% of salary does not subject the employee to tax. It has now been proposed that any contribution in excess of 0.15 million per annum would be taxable in the hands of employees. Further, withdrawal from Indian Social Security after completing continuous service of five years is currently fully exempt from tax. Now a proposal has been made PwC 3

4 wherein any withdrawal from the Indian Social Security shall be exempt from tax up to 40% of accumulation (out of contributions made on or after April 1, 2016). The increase of surcharges and changes in the taxation of Indian social security payments at the time of contribution and withdrawal will likely increase cost of assignment due to increased Indian tax liability and related tax gross up for the tax equalization of such payments. Additionally, the Finance Minister announced that the long term capital gain regime for unlisted companies may decrease from three to two years. Currently, long term capital gains from unlisted shares are taxed at 20% while short term capital gains are taxed at marginal tax rates. As a next step, companies who have mobile employees, should inform them about these changes and perhaps also factor in their budget the increased cost of these assignments. 4 PwC

5 Let s talk For more information about any of these developments, please feel free to contact any of our team members listed below. Remo Schmid (Partner) Frankfurt am Main +49 (69) schmid.remo@de.pwc.com Daniel Riehle (Senior Manager) Stuttgart +49 (711) daniel.riehle@de.pwc.com Andreas Eckhardt (Senior Manager) Hamburg +49 (40) andreas.eckhardt@de.pwc.com 2016 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the United States member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. SOLICITATION This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.