Employee Share Plans in Europe and the USA - Sorainen

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Employee Share Plans in Europe and the USABelgiumTax is normally charged on an amount equal to 15% of the value of theshares at the time that the option is granted. If the option can beexercised more than 5 years after the grant of the option, the tax chargeis increased by 1% for each year or fraction of a year beyond the fifthyear that the option is exercisable.It is possible to reduce the taxable basis by 50% (so that the initialstandard taxable basis would be 7.5%, rather than 15%, of the value ofthe shares) if (i) the exercise price of the option is set at the time ofgrant, (ii) the exercise period begins no earlier than 1 January of thefourth calendar year after the year in which the option was granted andends no later than the end of the tenth calendar year following the yearof the offer, (iii) the option is non-transferable, (iv) the grantor of theoption or any related party of the grantor does not provide any protectionagainst a decrease in the value of the underlying shares, and (v) theunderlying shares are shares of the employer or the parent of theemployer.If the exercise price is less than the market value of the shares at thetime of the offer, the taxable benefit is increased by the discount. Inaddition, if the terms of the option include a guaranteed benefit (forexample, a guaranteed minimum value for the shares), the taxablebenefit is increased by the value of that benefit.The employee is deemed to refuse the share option for tax purposesunless he accepts it in writing within 60 days following the offer of theoption. If the employee accepts the option before the end of the 60-dayperiod, the option is deemed to have been granted on the 60 th day fortax purposes.5.1.2 Exercise: There is no tax charge on exercise.7If the shares are listed on a stock exchange, the grantor may elect that the market value of the shareswill be either the average stock market price of the shares over the 30 day period preceding the grantdate or the stock market price on the trading day before the grant date.If the shares are not listed, the board of the company must decide on the value of the shares afteradvice from an auditor or chartered accountant. The value must not be less than the intrinsic value pershare of the company based on its latest accounts.UK/1729295/03 17 September 2010
Employee Share Plans in Europe and the USABelgium5.1.3 Social security contributions: Social security contributions do notarise on the grant of a "qualifying" 8 share option unless the exerciseprice is less than the market value of the shares at the time of the offeror the terms of the option include a guaranteed benefit. Where this isthe case, social security contributions are due on the amount of thediscount and/or the value of the guaranteed benefit.In any event, where the options are granted by a company other thanthe employing company (e.g. an affiliate of the employer or the parentcompany), the grantor does not charge back the costs to the employerand the employer is not the contact point to whom employees mustaddress any questions that may have in relation to the plan, no socialsecurity contributions should normally be payable.5.2 Employer tax and social security contributions5.2.1 Corporation tax deduction: The employer can normally claim acorporation tax deduction in respect of the costs incurred in establishingand administering an employee share plan. Capital losses on sharesare not tax deductible.5.2.2 Social security contributions: Employer social security contributionsare due to the extent that the employee is subject to social securitycontributions. The rate of employer's social security contributions isapproximately 35%.5.3 Tax withholding5.3.1 Belgian company: A Belgian employing company must withhold anytax and social security contributions due.5.3.2 Belgian subsidiary of a non-Belgian company: If the employingsubsidiary is considered to be an intermediary for tax purposes, it mustwithhold the tax and employee social security contributions owed by theemployee. If the subsidiary plays a minimal role in the plan (forexample, it is restricted to providing the names and addresses of theemployees), then the subsidiary should not be considered anintermediary and would not be required to withhold the tax andemployee social security contributions.8In order to be qualifying options, they must meet the definition of an "option" under the law of 26 March1999 which implies, for example, that the option is over a fixed number of shares and the exerciseprice must be determined or determinable on the basis of clear criteria.UK/1729295/03 18 September 2010
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Employee Share Plans in Europe and the USA - Sorainen

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