Tax Thursday: International Employee Equity Plans

Multinationals see value in providing a long-term incentive compensation program to key employees. Ideally, such plans reward key employees for strong company performance and align with the interest of shareholders.  Achieving a consistent program while complying with tax laws in different countries can present a challenge.

Background:

Most countries provide tax advantaged treatment of long-term incentive compensation such as stock options, restricted stock and deferred compensation.  However, the structure of the plans and the tax treatment often varies between different countries.  Creating an effective program with consistent objectives and outcomes for key employees can still be achieved with careful planning including:

• Considering when key employees in each country will have taxable income and pay social taxes related to their benefit.
• Considering if / when the Company is entitled to an income tax deduction for the benefit provided.
• Designing the program so that objectives such as key employee retention, incentives and rewards are applied reasonably consistently.
• Initiating a legal review in each country to minimize risk of un-intended tax consequences.

To Do:

Multinational companies should carefully consider the desired benefits to the Company and key employees when structuring a long-term incentive plan.  Utilizing the resources within Crowe can help ensure the program is consistent and compliant.

If you have any questions, please contact David Horvath or Greg Buteyn