Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAItaly6.3 If the shares were subject to income tax at the time of acquisition (includingwhere shares are acquired on the exercise of a share option), the capital gainwill be the difference between the sale proceeds and the market value of theshares at the time of acquisition of the shares/exercise of the share option.6.4 If the shares disposed of in a 12-month period are a "non-qualifiedshareholding" 19 , any capital gains are subject to a flat 12.5% capital gains taxcharge for the 2010 tax year 20 .7. Employee benefit trustsThere is no legislation dealing specifically with employee benefit trusts. As ageneral principle, an employee who is a beneficiary of a discretionary employeebenefit trust should not be taxable for that reason alone (provided the trustcannot be regarded as transparent for Italian tax purposes). The employeeshould be taxed when he actually receives benefits from the trust, as if he hadreceived those benefits as employment income directly from his employingcompany 21 .8. Data protectionAs a general rule under Italian law, employee consent must be obtained for thecollection, processing and worldwide transfer of personal data. However, it isarguable that there are circumstances where this would not be required inconnection with an employee share plan. Specifically, Legislative Decree No.192021In particular, a shareholding is defined as a "non-qualified-shareholding" if it amounts to no more than5% of the share capital or 2% of the shares with voting rights of a company whose shares are listed ona regulated stock market, in Italy or abroad, or to no more than 25% of the share capital or 20% of theshares with voting rights of a company whose shares are not listed on a regulated stock market. If theshareholding disposed of in a 12-month period is a "qualified shareholding", any capital gains aresubject to personal income tax at progressive rates (ranging from 23% to 43% for the 2010 tax year) tothe extent of 49.72% of their amount (100% in the case of a company whose shares are disposed of isresident in a State with a preferential tax regime).The capital gain is subject to taxation at the applicable marginal rate where the company whose sharesare disposed of is resident in a State with a preferential tax regime and it is not listed on a regulatedstock market.Although it is not possible to constitute an employee benefit trust under the laws of Italy, alternativesolutions have been devised to achieve similar goals. For example, by the creation of a "shareholdersassociation" (as provided by Legislative Decree n.58/98) or a "fiduciary mandate" or a "votingshareholders agreement". Furthermore, under the Aja Convention of 1985 (which is applicable inItaly), an employee benefit trust could be, in principle, recognised under Italian law when dulyconstituted under the law of a foreign country in which it is possible to constitute such a trust.Therefore there is no prohibition on an Italian employing company making a contribution to such a trustfor the benefit of an Italian company's employees. The only case in which recognition could be deniedis when the effects of such recognition conflict with the Italian Constitution.UK/1729295/03 121 September 2010