Are You On Top of Tax Issues for Equity Plans?

Transcription

1 Are You On Top of Tax Issues for Equity Plans? Suzie Bentley, Director, NVIDIA AmyLynn Flood, Partner, PwC Jennifer George, Director, PwC Sarah Hagberg, Senior Manager, Western Union

2 Agenda Company Stats Tax Concerns: Qualified/Beneficial Plans Filing requirements Withholding issues Employee communications Painful Countries! Practitioners Tips

3 Company Stats: NVIDIA Number of employees worldwide: 9,500 Number of countries granting equity in: 23 Types of equity plans offered: ESPP, RSUs, PSUs (legacy NQSO/ISO) Company philosophy in making grants: Broadbased by levels Countries where equity not granted: ESPP (all); EIP (3) Countries in which tax favored plans are offered: U.S.; legacy French grants; China; Finland

4 Company Stats: Western Union Number of employees worldwide:10,500 Number of countries granting equity in: 46 Types of equity plans offered: RSUs, NQSO s, PSU s Company philosophy in making grants: Countries where equity not granted: Approximately 7 Countries in which tax favored plans are offered: France?

5 Tax Favored Plans Are they worth it? Key countries France Israel UK How to decide if they are right for your company? NVIDIA? Western Union?

6 Tax Filing Countries Generally two types of filings: General annual wage statement inclusion of equity awards Special equity filings Australia, China, Ireland, Japan, UK, France (qualified awards) Best practices for staying on top of tax filings NVIDIA Western Union

7 Tax Withholding Choices for Withholding: Withhold from wages Withhold in shares (net settlement) Sell shares to cover taxes Employee choice Likely varies by award type & country NVIDIA? Western Union?

8 Tax Withholding (cont d) Withholding from wages Pros Precise withholding rate can be utilized Cons Insufficient funds to cover the tax withholdings Withholding from shares Selling shares Minimize dilution; employee does not pay commissions on the shares withheld Sales proceeds fund the payroll taxes; flexibility as to withholding rates Company must fund the tax using company cash; potential accounting implications Closed window period; employee authorization to sell shares

9 Tax Withholding (cont d) Withholding rate to use? U.S.: federal- supplemental rates Outside U.S.: generally, progressive rates required May depend on award type ESPP: most common: withhold from paychecks Options: most common: withhold at highest rate and refund any overwithholding through next payroll RSU: most common: withhold at actual progressive rate (if net share issuances)

10 Tax Withholding (cont d) NVIDIA- Conscious of Liability Accounting RSUs / PSUs Net Share Settlement (US) Sale to Cover (outside US where required) ESPP No tax withholding at source via payroll as required NQSO Highest rates provided by country refund excess through payroll

11 Tax Withholding (cont d) Western Union Live issues include: Variable accounting concerns Withhold to cover/net share issuance Variance in minimum rates vs. employee tax rates

12 Employee Tax Communications Advisable to educate employees with the material tax consequences of their equity awards and whether you will be withholding for taxes; avoid giving personal tax advice Level of detail? Translate communications? Where to post/ distribute? How often to update? NVIDIA? Western Union?

13 RSU Global Tax* Shares Withheld Company will withhold shares from vested portion of grant to cover tax liability Canada China Finland Germany India Italy Switzerland United Kingdom United States Taxable Compensation Company will report taxable compensation but will not withhold any taxes Australia Czech Republic*** France (Q) ** Hong Kong Japan Korea*** Poland Russia*** Singapore Taiwan Taxable Compensation Company will report taxable compensation and may withhold taxes through payroll Austria France (NQ)** Spain Sweden * Handling of Global tax is subject to change based on local regulations and requirements. Any tax rates applied to RSU vested shares are provided by Regional Finance groups based upon estimated values of compensation. Please direct your tax rate related questions to your Regional Finance group who processes your Payroll. ** French RSU Sub-plan ( Q ) requires two year vesting period and no tax withholding. FY13 grants not under the sub-plan ( NQ ) will be taxable at vest. [Non-Qualified grants issued in FY14 will be reviewed for taxation.]

14 Painful Countries! Australia- options, tax generally at vesting! (although proposed changes) Brazil- what are the rules/ risk? France- qualified awards? India- Indian merchant banker valuations Israel- tax at sale and employer required to w/h Japan ESPP lookback periods may trigger filing Philippines- employer paid FBT due on awards to supervisory/ managerial level employees? U.S.- be careful of 409A!

15 Painful Countries (cont d) NVIDIA S handling of painful countries: Brazil ESPP requires participation clearance (bank account, up-to-date tax filing & payroll verification) China Mobile workforce handling of equity received in country; Terminated employees; Dividends France Taxation changes; mobile employees Japan ESPP look-back triggered at 25 employees, not 50; requires six securities filings and prospectus (electronic consent) US movement between states

16 Painful Countries (cont d) Western Union s handling of painful countries: Australia- mobile employees are particularly challenging China non PRC nationals and LTIP registration France- riding the tides of change - to subplan or not to subplan? India- who bears cost of Category 1 Merchant Banker? Malaysia employee demand for equity in a challenging tax environment Philippines- weighing increasing compliance costs UK mergers and acquisitions acquiring a complex Form 42 is easy when you merge entities and employees

17 Different FMVs?? Country definition of FMV different than your plan definition? Belgium Germany India Italy Malaysia Complexities in handling

18 Practitioners Tips NVIDIA: Work closely with global payroll teams Stay informed! Changes occur quickly Internal compensation changes Regulatory changes Communication changes Be Flexible without bending over backwards!

19 Practitioners Tips Western Union: Define and know your company s internal process but remain adaptable Distinguish being adaptable from being reactive Compliance vs administration who and what? Stay plugged in utilize real-time resources, get feedback from HR, Managers.

20 Thank You Suzie Bentley NVIDIA AmyLynn Flood PwC Jennifer George PwC Sarah Hagberg Western Union