Employee Share Plans in Europe and the USA - Sorainen

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Employee Share Plans in Europe and the USAGermanyemployee share plan as section 14 of the Securities Trading Act prohibits theacquisition of shares on the basis of inside information. Receipt of insideinformation after subscription is, however, irrelevant.2. Exchange controlsThere are no exchange controls. 63. Financial assistance3.1 German company: Although a German stock corporation (Aktiengesellschaft)(AG) is not allowed to finance the acquisition of its own shares by any third party,there is an exemption for advances, loans or the provision of security for thepurpose of the acquisition of shares by employees of the company or employeesof group companies provided that the company has certain capital reserves. AnAG is in principle permitted to acquire its own shares for the purposes of anemployee share plan, provided (i) this has been, in certain circumstances,approved by shareholders, (ii) it has certain capital reserves and (iii) sharesalready held and to be acquired do not exceed 10% of the company's sharecapital. 7,83.2 German subsidiary of non-German company: The restrictions set out inparagraph 3.1 above also apply to a German AG which is a subsidiary of a non-German company.4. Taxation of share acquisitions4.1 Employee tax and social security contributions4.1.1 Tax: A German employee who acquires shares in his employingcompany or its parent company free of charge or at a discount to marketvalue will normally be liable to pay wage tax and a solidarity surcharge(and church-tax, if any). The tax charge is on the difference between the678For purely statistical purposes any transfer into or out of Germany of more than €12,500 or theequivalent amount in another currency must be notified to the Deutsche Bundesbank ServicezentrumAußenwirtschaftsstatistik at Mainz, which is the competent federal office of the German Central Bank(Deutsche Bundesbank) for such notifications in Germany. This is generally handled by the bankremitting the funds. Notifications may also be effected online.A GmbH is, in principle, not subject to financial assistance restrictions applicable to an AG; however,the capital preservation rules apply.The BaFin has further restricted the buy-back of own shares in the regulation specifying the prohibitionof market manipulation (Marktmanipulations-Konkretisierungsverordnung) which further definesactivities which may generally qualify as market manipulation. However, there is an explicit safeharbour for share buy-backs if these meet the criteria in EU Regulation 2273/2003/EC.UK/1729295/03 79 September 2010
Employee Share Plans in Europe and the USAGermanymarket value of the shares at the time of acquisition and the amount, ifany, paid for the shares. For the 2010 tax year wage tax ranges from0% to 45%. The solidarity surcharge amounts to 5.5% of the wage taxliability. The maximum income tax rate applies from an annual overallincome of €250,001 or €500,002 in the case of jointly-assessed couples.The rates of church-tax currently vary between 8% to 9% upon incometax subject to certain caps.4.1.2 Tax exemption: A tax exemption for share-based payments has beenavailable since 1 April 2009.Any discount on the acquisition of the shares is tax exempt to the extentthis does not exceed €360 per year. In order for the new exemption toapply, two requirements must be met: (1) participation in the plan mustbe an additional benefit for the employee (i.e. the benefit may not bededucted or credited against the employee's agreed wage) and (2) theemployer (i.e. the German subsidiary) must offer participation in the planto all employees. Companies may amend their existing plans to benefitfrom the new exemption for future share acquisitions.Where the tax exemption applies, then an equivalent exemption fromsocial security contributions will also apply.4.1.3 Social security contributions: Social security contributions are duewhere the employee is subject to wage tax. The rates in 2010 9 are19.9% for retirement benefit insurance, 2.8% for unemploymentinsurance (to be increased to 3% from 1 January 2011), 10 1.95% (plusan additional charge of 0.25% for childless employees born after 1January 1940 and older than 23) for nursing insurance 11 and 14.9% forstatutory health insurance. Social security contributions are, in principle,borne 50/50 by the employer and the employee.For any income in excess of specific salary thresholds, no further socialsecurity contributions have to be paid. The applicable annual salarythresholds in 2010 are: €66,000 for retirement benefits insurance,€66,000 for unemployment insurance, €45,000 for statutory healthinsurance and €45,000 for nursing insurance. These thresholds only91011The rates for 2011 are not yet available.Section 341 para 2 Social Security Code III (Sozialgesetzbuch III).Section 55 Social Security Code XI (Sozialgesetzbuch XI).UK/1729295/03 80 September 2010
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Employee Share Plans in Europe and the USA - Sorainen

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