Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAFinland4.2.2 Social security contributions: In general, the employer must paystatutory social security contributions (at a rate of 2.23% for 2010) on theamount of the taxable income. 9 However, if the right to subscribe fornewly issued shares at a discount to market value is offered to themajority of employees (i.e. the partial exemption referred to in paragraph4.1.2 above applies) or in certain circumstances where listed shares areoffered, no statutory social security contributions are payable by theemployer. In these circumstances, no pension or other social securityrelated payments are payable by the employer either.4.3 Tax withholdingAdvance income tax (including the medical care premium and the dailyallowance premium referred to above) must be withheld monthly by theemployer. The final tax assessment takes place in the calendar year followingthe year in which the income or benefit was received. If the amount of advanceincome tax withheld is insufficient to cover the final amount of income tax due,the employee has to pay the difference, together with interest, usually inDecember of the tax assessment year and in February of the year following thetax assessment year. Employees can avoid the interest charge by topping upthe advance income tax by the end of January in the tax assessment year.If a tax audit reveals that the employer has failed to withhold advance incometax, tax on the income from which the employer has failed to withhold advanceincome tax is levied on the employer at a rate of up to 40% (and interest andpenalty charges may also become payable). 10 This tax can be refunded to theemployer upon application, once it has been established that the employee hasfully paid the final tax in respect of the employment income.5. Taxation of share options5.1 Employee tax and social security contributions5.1.1 Grant: There is no tax charge on the grant of a share option.910In addition to the statutory social security contribution the employer is obliged to pay a pensionpremium of 16.9%, an unemployment security premium of 0.75% (2.95% where the employee's salaryamount exceeds €1,846,500), a group life insurance premium of 0.07% and an accident insurancepremium of 1% on the amount of the taxable income (2010). The aforementioned percentages areaverage figures.It should be noted that in circumstances where the employer has neglected its reporting obligation inrelation to the advance taxes or intentionally gives a false document relating thereto, the amount ofincome tax payable may be doubled. Furthermore, in the case of fraud, the amount of income tax willbe increased by 50% and potentially tripled.UK/1729295/03 50 September 2010