Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAThe Netherlandsthat it is expected that the financial assistance prohibition for BV's will beabolished following a legislative proposal that is expected to enter into force inthe course of 2011).3.2 Dutch subsidiary of non-Dutch company: From a Dutch law perspective it isarguable that the general restriction on a Dutch subsidiary providing financialassistance (e.g. a loan) for the acquisition of shares in its Dutch parent companyshould not apply where the parent company is not Dutch. However, there is nospecific case law on this point and the position is not free from doubt.4. Taxation of share acquisitions4.1 Employee tax and social security contributions 74.1.1 Tax: An employee who acquires shares in his employing company or itsparent company free of charge or at a discount to market value willnormally be liable to pay income tax. The tax charge is on the differencebetween the market value of the shares at the time of acquisition and theamount, if any, paid for the shares. For the 2010 tax year theprogressive rates of income and social security charges range from33.45% to 52%.4.1.2 Social security contributions: An employee will be subject to generalsocial security contributions as part of the income tax due (thesecontributions are capped on income at €33,189 for 2010). The rates ofgeneral social security contributions are included in the progressiveincome tax rates referred to in paragraph 4.1.1.4.2 Employer tax and social security contributions4.2.1 Corporation tax deduction: In respect of shares awarded after 24 May2006, the amount of any discount charged to the Dutch company by theforeign parent company or, as the case may be, the difference betweenthe arm’s length purchase price and the lower purchase price charged tothe employee is no longer deductible for corporate income purposes.Furthermore, the Dutch employing company is no longer able to deductthe cost of establishing and administering a share plan to enableemployees to acquire shares in a foreign parent company. The costs ofcash-settled stock appreciation rights should still qualify for a taxdeduction if paid by, or charged to, a Dutch company.7Please note that the comments made in this section assume that the Dutch rules on so-called "lucrativeinvestments" do not apply. (In general, these rules do not apply to "regular" employee share plans.)UK/1729295/03 139 September 2010