Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAFinlandincome is the difference between the market value of the shares at thetime of acquisition and the price, if any, paid for the shares. For 2010,the highest rate of tax is 55.40% (including a medical care premium at arate of 1.47% and a daily allowance premium at a rate of 0.93%).4.1.2 Partial exemption: If a right to subscribe for new shares at a discountto market value is offered to the majority of employees, the discount willbe tax exempt to the extent that it does not exceed 10% of the marketvalue. Any discount in excess of 10% will be subject to income tax asreferred to above.4.1.3 Social security contributions: In general, all social security relatedpayments are payable (being medical care premium of 1.47%, a dailyallowance premium of 0.93%, a pension premium of 4.5% 6 and anunemployment security premium of 0.40% (2010 rates). However,where the partial exemption at paragraph 4.1.2 above applies or incertain circumstances where listed shares are offered, no pension orother social security related payments will be due other than the medicalcare premium at a higher rate of 1.64% 7 .4.2 Employer tax and social security contributions4.2.1 Corporation tax deduction: Expenses charged to a Finnish employeron arm's length terms are generally deductible for Finnish corporationtax purposes where market purchase shares are used. 86785.74% for employees of age 53 or over.The medical care premium payable on the benefit in question is increased by 0.17% in comparison tothe normal amount (i.e. from 1.47% to 1.64%) (2010).Generally, computed costs incurred in relation to share-based incentive plans, such as the cost ofshare-based remuneration under IFRS 2 are not deductible, unless the costs are deemed tocorrespond to the "factual" expenses of the employer. Cash bonuses, including cash payments madeon the basis of the increase in value of the employer's shares are generally deductible. If the companyacquires own shares to be used in share-based incentive plans (e.g. employee option plans andemployee issues) in public trade, the amount paid for the own shares is a deductible expense for thecompany in the tax year the employee receives or subscribes for the shares. The deductible amountcannot exceed the fair market value of the shares at the time of grant less the subscription price paidby the employee, i.e. the value on which the employee is liable to pay tax. The deduction is availableonly for the company's existing own shares (i.e. treasury shares), not for newly issued shares. Wheretreasury shares are used, 1.6% transfer tax on the subscription price is also payable by the employee.If shares of other group companies (typically parent companies) are used in incentive plans, thecompensation paid by the employer company to the issuing company in respect of the shares may alsobe deductible.UK/1729295/03 49 September 2010