Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USASpain5.1.4 Tax exemption: The tax exemption referred to in paragraph 4.1.3applies if the relevant conditions are met at the time of exercise of theoption. 225.2 Employer tax and social security contributions5.2.1 Corporation tax deduction: The costs involved in the administration ofa share plan and employer social security contributions are deductible. 23When shares are purchased or a cost is incurred under a rechargearrangement with a foreign parent, the costs are also deductible. 245.2.2 Social security contributions: Social security contributions arise onthe exercise of an option on the amount subject to income tax at astandard rate (for the 2010 tax year) of 29.90% for indefiniteemployment contracts, 31.10% for full-time fixed-term employmentcontracts and 32.10% for part-time fixed-term employment contracts,plus contributions for occupational accidents and illnesses (which rangefrom 0.90% to 8.15%, depending on the type of activity carried out). Themaximum earnings threshold for 2010 is €3,198 per month. 255.3 Tax withholdingThe employer must withhold any income tax and social security contributionsarising from the exercise of the option. 266. Taxation of share disposalsThe difference between the sale proceeds of the shares and (if lower) the marketvalue of the shares on the date of acquisition is taxed at a fixed rate of 19% on2223242526In cases where the exemption is not applicable because the requirements are not met or because thebenefit obtained by the employee exceeds the exempted €12,000, the taxable income in both casescan be reduced by up to 40%, provided that the taxable benefit is classed as "irregular income". Theamount of taxable income which may be exempted cannot exceed 40% of the average annual salary(the average annual salary for 2010 is €22,100) multiplied by the number of years from grant tovesting. This limit may be doubled if the shares are held for at least 3 years and the offer of optionswas made to all employees (of the company or group company) on the same terms.Invoices should support these costs.Provided documents to evidence the cost support the claim (this cost will be categorised as a salarycost).Therefore, in principle, no contribution is paid on earnings over this amount. Earnings mustnevertheless be apportioned in the fiscal year in which they are received and separate additionalcontributions must be produced for any previous months.Provided that it exceeds or is not included in the tax exemption referred to above.UK/1729295/03 176 September 2010