Employee Share Plans in Europe and the USA - Sorainen

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Employee Share Plans in Europe and the USAAustriacompany remains unclear. It is recommended that Austrian subsidiaries complywith the same requirements as are set out in paragraph 3.1 above.4. Taxation of share acquisitions4.1 Employee tax and social security contributions4.1.1 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 income taxrates range from 0% to 50%.4.1.2 Social security contributions: An employee will be subject to socialsecurity contributions on the amount of his gross monthly salary (up to amaximum of €4,110) at rates ranging from 18.07% (white collar workers)to 18.20% (blue collar workers).4.1.3 Tax and social security contributions exemption: Austrianemployees can acquire shares with a value of up to €1,460 a year freeof income tax and social security contributions, subject to certainconditions. 64.2 Employer tax and social security contributions4.2.1 Corporation tax deduction: The employer may obtain a corporationtax deduction for the employee share plan costs incurred.6See section 3, paragraph 1, subsection 15(b) of the Austrian Income Tax Act and section 49,paragraph 3 subsection 18(c) of the Austrian General Social Security Act. The detailed conditions arethat:• the shares are acquired directly by the employee;• the employee does not sell the shares within 5 years of acquisition (unless the sale is due totermination of employment, regardless of the reason for the termination). The 5 year period startsfrom the end of the calendar year in which the shares were acquired. The employee must prove tohis employer before 31 March of each year that he still retains ownership of the shares and mustinform the employer without delay if he sells the shares before the expiry of the 5 year period;• the shares are granted to all employees or to all employees within a defined group within thecompany (defined either by operational organisation (e.g. blue collar workers/white collar workers)or fields of work (staff salesman/mechanics etc.). The Austrian tax authorities apply the definition of"group of employees" rigorously;• if the participation is in the form of securities, these must be deposited with an Austrian or EEAcredit institution, or a trustee appointed by the employer and the works council.UK/1729295/03 9 September 2010
Employee Share Plans in Europe and the USAAustria4.2.2 Social security contributions: Employer social security contributionswill be payable in respect of shares provided to employees for free or ata discount to market value if the employee is subject to social securitycontributions and the value of the shares is higher than the specialexemption (€1,460 a year – see paragraph 4.1.3 above). The maximumrate of employer's social security contributions for the 2010 tax year is21.70% for blue collar workers and 21.83% for white collar workers. Theupper income limit for employer social security contributions in 2010 isan employee's gross monthly salary of €4,110.4.3 Tax withholdingUnder certain circumstances, an amount equivalent to 1.53% of theemployee's monthly gross salary must be paid by the employer into afund for future severance payments (this is a scheme which has appliedsince January 2003).The employer must withhold any income tax and employee social securitycontributions due.5. Taxation of share options5.1 Employee tax and social security contributions5.1.1 Grant: There is no tax or social security contributions charge on thegrant of a share option unless the option is characterised as aneconomic good. 75.1.2 Exercise: There is an income tax charge on the exercise of a shareoption on the difference between the market value of the shares at thedate of exercise and the option exercise price. For the 2010 tax yearincome tax rates range from 0% to 50%.5.1.3 Social security contributions: Social security contributions arise onthe exercise of options at rates ranging from 18.07% (white collarworkers) to 18.20% (blue collar workers). The basis for liability is theemployee's gross monthly salary subject to an upper income limit forsocial security contributions of €4,110 for 2010.7Pursuant to Austrian administrative practice. This will be the case if the option is transferable andgranted unconditionally.UK/1729295/03 10 September 2010
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Employee Share Plans in Europe and the USA - Sorainen

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