Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USARepublic of Irelandshares he receives if he holds the shares for at least 3 years. A tax approvedprofit sharing plan must satisfy a number of conditions of which the mostimportant are that all full time employees are offered participation and thescheme is approved by the Irish tax authorities. Employees may acquire shareswith a value of up to €12,700 each year under such a plan.In addition, an employer will be able to claim a tax deduction in respect of thecost of issuing shares to a tax approved employee share plan. Payments madeto the trustees of an approved profit sharing plan are tax deductible, provided thecompany or its parent company. Provided certain conditions are complied with, and the prior approvalof the Irish Revenue authorities is obtained for both the scheme itself and the related trust deed,beneficiaries under these schemes will incur no income tax liability. There may, however, be a capitalgains tax charge on a subsequent disposal of shares received under the scheme. The main featuresof such approved schemes are as follows:• the trustees of the scheme are persons resident in Ireland;• the trustees are put in funds by the Irish company;• the trustees must acquire shares which form part of the ordinary share capital of the company andmust allocate these to qualifying employees up to an initial market value of €12,700 per annumeach;• the scheme must be open to all full-time employees and directors of the company who have beenemployed by the company for three years or more. However, the company may also extend thescheme to include part-time employees, or employees with less than three years service;• the employee must undertake not to assign, charge or dispose of his beneficial interest in theshares within the period of retention (that is, either two years from the date the shares are firstallocated or, if earlier, the cessation of the employee’s employment in certain compassionatecircumstances);• the trustees retain the shares during the retention period;• in general, the employee must pay to the trustees a sum equal to income tax at the standard rate(for the 2010 tax year 20%) on the value of the shares if he directs the shares to be transferredwithin three years of appropriation;• special provisions apply where there is a reconstruction or take-over of the employer company; and• an employee is not eligible to participate if he owns 15% or more of the share capital of theemployer company if it is a "close" company (that is, in broad terms, a company controlled by fiveor fewer persons, or by its directors).There are certain conditions applicable to the shares used for such schemes. They must be ordinaryshares of the company establishing the scheme, or those of a company controlling that company, orthose of a company which is a member of a consortium owning the company establishing the scheme.If the shares are not of a class quoted on a recognised stock exchange, the company must not beunder the control of another company.The Revenue authorities have confirmed that profit sharing schemes with an employee contributionelement are capable of approval under the legislation. These can be on a "buy one, get one free"basis, in which case the employee contributes out of after-tax salary, or on a non-compulsory “buyextra shares” basis, in which case the employee may contribute by foregoing salary.UK/1729295/03 105 September 2010