Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAHungary5.2 Employer tax and social security contributions5.2.1 Corporation tax deduction: The costs of a share plan borne by theemployer (e.g. via a recharge payment to the parent company) arenormally tax deductible for the employer.5.2.2 Social security contributions: The employer is subject to socialsecurity charges at a rate of 27%.5.3 Tax withholdingWhere the awards are made by, or the plan is arranged via, the local employer,then the local employer is required to withhold any income tax and socialsecurity contributions payable by the employee. A foreign parent companymaking awards which does not have a taxable presence in Hungary is notsubject to tax withholding obligations.6. Taxation of share disposals6.1 The capital gain (being the difference between the sale price of the shares andthe fair market value of the shares at the point income tax was charged inrespect of the acquisition of the shares) is taxable when the shares are sold. Forshares acquired under an approved employee share plan, the capital gain isequal to the difference between the sale price and the amount paid by theemployee for the shares, if any.6.2 The capital gain is subject to tax at a rate of 25%. If the shares are sold on aregulated capital market of any EEA or OECD member state, the gain is subjectto 20% tax (instead of tax at 25%). A capital gain subject to 25% tax (but not thecapital gain realised on a regulated capital market transaction) may also besubject to a 14% health care tax, if the amount of social security contributionspaid on behalf of the employee does not amount to HUF 450,000 in the relevantfiscal year.7. Employee benefit trusts7.1 Employee benefit trusts are not recognised under Hungarian law. However, aHungarian company may make a contribution to such a trust for the benefit of itsemployees.7.2 An employee who is a beneficiary of a discretionary employee benefit trustshould not be taxable for that reason alone. He should only become taxable onbenefits he actually receives from the trust, which in the case of shares will beUK/1729295/03 98 September 2010