Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USARussian Federation2. Exchange controlsForeign currency transactions between a Russian resident and a non-residentare generally unrestricted. 10 As a general rule, foreign currency transactionsbetween Russian residents are prohibited. It is recommended that exchangecontrol issues are analysed on a case-by-case basis.3. Financial assistance3.1 Russian company: A Russian company is not prohibited from providingfinancial assistance (including the provision of a security or a guarantee) toacquire its own shares or shares in a Russian parent company. However, theprovision by a Russian company of financial assistance to acquire shares in itsRussian parent company may require the Russian company to obtain certaincorporate approvals.3.2 Russian subsidiary of non-Russian company: A Russian subsidiary is notprohibited from providing financial assistance (including the provision of asecurity or a guarantee) to acquire its own shares or shares in its parentcompany. However, the provision by a Russian subsidiary of financialassistance to acquire shares in its parent company may require the Russiansubsidiary to obtain certain corporate approvals.4. Taxation of share acquisitions4.1 Employee tax and social security contributions4.1.1 Income Tax: An employee who acquires shares in his employingcompany or its parent company free of charge or at a discount to theirmarket value will normally be liable to pay income tax. The tax isassessed on the so-called "material benefit" where shares are acquiredat less than market value, i.e. on the difference between the marketvalue of the shares at the time of acquisition and the amount, if any, paid11 12for the shares.1011A Russian individual, who has opened a bank account outside the Russian Federation, is obliged tonotify the Russian tax authorities of such account and report the balance of the account to the taxauthorities annually.From 1 January 2011 the market value will be determined based on rules to be set by the FSFM.Before 1 January 2011 the market value should be equal to an average-weighted value calculated by astock exchange. In the absence of such information from the stock exchange, the market value isdeemed to be equal to an average-weighted value determined at the closest trading date, provided thatsuch securities were traded at least once within the period of three months prior the sale date. In theabsence of a determination from the FSFM as to a methodology for determining market value, it is notentirely clear as to whether the above approach can also be applied to securities which are not tradedUK/1729295/03 164 September 2010