Equity Remuneration Incentive Scheme (Start-Ups) - IRAS

34. Whenever a qualifying company grants a tranche of stock options or share
awards to a qualifying employee where the gain from the subsequent exercise of the
options can qualify for a 75% tax exemption under the ERIS (Start-Ups), the
company is required to give a written confirmation to the employee confirming that
the qualifying criteria of the ERIS (Start-Ups) have been met in respect of that
tranche of options or shares granted (Annex 5 provides a specimen of the written
confirmation, which sets out the minimum information to be incorporated).
35. This requirement applies to every tranche of options or share awards granted
by the qualifying company under its ERIS (Start-Ups) Plan to each of its qualifying
employees. If it were subsequently found that any of the qualifying criteria under the
ERIS (Start-Ups) has not been met, the 75% tax exemption will not be granted, or if
previously granted, be withdrawn on the gains derived by the employee from the
grant of or the exercise of that tranche of share awards or stock options. The
Comptroller may also impose appropriate penalties on the company for giving any
incorrect information unless this is due solely to an incorrect declaration made by its
employee with respect to his total working time per week or the level of his beneficial
share ownership in the company at the time of the grant of options (see paragraphs
19 to 21).
36. In addition, a qualifying company is required to keep sufficient documentation,
including any declaration given by its qualifying employee, to show, when required by
the Comptroller, that the qualifying criteria under the ERIS (Start-Ups) have been met
at the time the options were granted to the qualifying employee.
Qualifying Employee
37. As mentioned in paragraph 19, where an employee, who is granted stock
options or share awards by a qualifying company that operates an ERIS (Start-Ups)
Plan, works for the company for less than 30 hours per week at the time of the grant
of stock options or shares, he is required to make a declaration to the company on
his total working time per week at the time to enable the company to determine
whether he meets the 75% test to qualify him under the ERIS (Start-Ups).
38. Further, as mentioned in paragraph 21, where it is not clear to the qualifying
company that the employee does not have effective control of the company, he is
required to make a declaration to the company on his beneficial ownership, directly
or indirectly, of voting shares in the company.
39. In the absence of a declaration, where required, to the qualifying company,
the employee will not be considered as a qualifying employee under the ERIS (Start-
Ups). If an employee is subsequently found to have made any incorrect declaration
to the qualifying company, the 75% tax exemption will not be granted or, if previously
granted, will be withdrawn on the relevant ESOP gains. In such cases, the
Comptroller may also impose appropriate penalties on the employee.
40. In addition, a qualifying employee should keep the written confirmation
mentioned in paragraph 34 and upon request, produce it to the Comptroller for
verification.
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