Our Global Equity Update includes the following articles:
Payroll tax is a state-based tax imposed on employers in respect of taxable wages in Australia. It is based on a “self-assessment”, whereby employers establish their level of wages paid and whether the level requires them to register. Each Australian state and territory has their own payroll tax threshold and once the wages paid exceed this threshold, payroll tax becomes payable to the applicable State Revenue Office (SRO).
Vialto has become aware of an increasing volume in audits and investigation activities across many state and territory jurisdictions. The SRO’s perform analysis against other employer lodgements made to the Australian Tax Office in determining areas to audit in payroll tax. This can result either in audits based on specific issues (such as taxable wages for fringe benefits, contractors or employer share schemes) or a general investigation review. Often the SRO’s will also then extend their review to cover a payroll tax annual reconciliation for a 5 year period.
In relation to the review of Employee Share Schemes, equity awards such as shares, options and restricted stock units provided to any employee, including by a foreign related company, are also subject to payroll tax. Often we have seen organisations incorrectly exclude the taxable value of employee equity awards in their payroll tax returns, particularly where the equity awards are not processed via the Australian payroll.
It is therefore more important than ever that organisations ensure that compliance and governance processes are up to date in relation to the completion of the annual payroll tax reconciliation, including undertaking contractor reviews and conducting internal data comparisons. If you would like to discuss your risk level please contact us at the below contact details.
On 8 July, Law 27,743, approved by the National Congress, was published in the official bulletin, outlining reforms directly impacting Income Tax. The applicable scales for Income Tax were updated to be more progressive and the flat tax on high incomes in effect at that time was repealed.
A progressive tax scale is re-established, with rates ranging from 5% to 35%, albeit with a significant increase in the income thresholds at which these rates apply. It is also important to note that benefits from equity plans are taxed in Argentina alongside salary as a form of in-kind benefit. Please see our prior update, for a closer look at the changes and tax rates.
The update is mandatory and it applies for payroll calculations starting from 1 July 2024. It is important to note that the vast majority of companies in Argentina have delayed the implementation of the regime by one to two months due to delays in updating both internal and external payroll systems. Vialto can assist in ensuring these requirements are adequately met and implemented, please reach out to us if you would like to discuss.
The 1st Section of the Superior Court of Justice (STJ) recently decided, through the judgment of the Repetitive Appeal No. 1226, that Stock Options Plan granted by companies to its executives, provided its general characteristics are met, has a strictly commercial nature and not a compensation one.
The judges also agreed that under a Stock Option Plan scheme, due to its commercial nature, Individual Income Tax (IRPF) is not levied upon the acquisition of the shares from the company that granted the option, as there is no capital increase on behalf of the buyer. In case there is a capital gain on the event, the IRPF will be levied according to the specific rules to be observed.
As the decision was made following repetitive appeals, the agreement on taxation will be mandatory for similar cases in other courts as well as administrative bodies, however the decision is awaiting final judgement, meaning appeals can still be filed for the review of the ruling.
Following our previous update, we advised of proposed legislation in Canada which would reduce the stock option deduction from ½ to ⅓ of the taxable amount for individuals whose annual combined limit exceeds CAD 250,000.
While there still remains to be additional updates on passing the legislation by the CRA, Vialto did want to give an update on the practical approaches we are seeing across our clients. While it’s unclear whether the CRA has the authority to assess underwithholding penalties for legislation that has not yet passed into law, we are advising companies to take the conservative approach and consider withholding at the higher tax rates.
When companies issue employees share-based compensation then they should be aware of two individual Danish reporting obligations that become required, elndkomst (traditional payroll reporting) and eKapital (the Danish share-register AKSA reporting).
The Danish tax authorities are currently putting a lot of resources into checking that companies fulfill their obligations to report to eKapital (AKSA). The deadline for this filing is 20 January 2025. If you have equity incentives and Danish assignees (either inbound or outbound of the country) or former assignees with Danish trailing liabilities then your organization should be AKSA compliant. For any assistance or more information of which equity events trigger reporting, please contact Vialto at the below contact information.
The Finance Act, 2024 allows employees to claim a credit of the Tax Collected at Source (TCS) as well as Tax Deducted at Source (TDS) on income other than salary, against TDS to be paid on salary income. This amendment is applicable with effect from 1 October 2024. This means employees will have the option to declare the details of TCS and/or TDS on other income (such as equity income), to their employer. When advised by the employee, the employer will need to take into account the said TCS and/or TDS on other income to calculate the TDS on salary income.
On 16 October 2024, the tax authorities announced the required procedural changes for the TCS amendment. They have issued the specified form for collecting details from the employee, required changes in the Q4 withholding tax return as well as annual withholding tax certificate.
While employers can continue to follow their current method for calculating withholding tax in India (e.g. a flat rate to apply), they should adhere to the procedural clarity provided when calculating the final withholding tax liability for employees. Please reach out to us if you require further guidance.
On 1 October 2024, the Government confirmed they have published the findings of an independent review of share based remuneration, the “Indecon” review of the taxation of share-based remuneration, which was undertaken earlier this year.
Such recommendations include:
The government has advised that the recommendations will be considered in due course. Until then, we await further updates.
The Israeli authorities have set out an aim to move reporting for equity grants online and are setting up an online reporting portal for both quarterly and annual reporting of equity grants. Currently the system is in testing and has not been officially rolled out.
The initial tentative advice (which is subject to change) on when this would begin is that the quarterly reporting should be available for use in 2025 and the annual reporting will be available from 2026 (for reporting the calendar year 2025). More information will be provided in the near term.
On 18 October 2024, Prime Minister Datuk Seri Anwar Ibrahim unveiled Budget 2025. Within this budget, is a proposed Dividend Tax for individuals.
Effective from Y/A 2025, it is proposed that a 2% Dividend Tax will be introduced on dividend income exceeding MYR100,000 received by individual shareholders for dividends paid, credited or distributed from company profits.
This tax will apply to individual shareholders, both resident and non-resident, and individuals who hold shares through a nominee. The tax is to be imposed on chargeable dividend income after taking into account allowances and deductions.
A number of exemptions apply, including an exemption for dividends received from abroad. Should this tax be approved, and where relevant, employers should consider updating employee communications.
The Dutch Budget Day 2024 has brought with it proposed legislative changes and relevant changes set to take effect from 1 January 2025. Below, you will find further details and considerations regarding proposed and upcoming legislation that is relevant from an equity and mobility tax perspective.
What are the most important (proposed) changes?
Wage tax – 30% ruling to become the 27% ruling as of 2027
The Tax Plan 2025 contains various changes to the Dutch expat tax regime (the 30% ruling). The actual legislative drafts are expected to be published in the week of 14 October and it is likely that these changes will be approved in December 2024 in accordance with the normal legislative process (potentially with amendments from the Dutch House of Representatives). In the meantime, we have summarized the key (announced) changes to the 30% ruling based on the attachments to the Tax Plan.
Tax exempt amount: 30% in 2025 and 2026, 27% as of 2027
The first announced change concerns the partial reversal of the so-called 30/20/10 ruling that applies as of 1 January 2024. Under the 30/20/10 ruling, the maximum tax free allowance under the 30% ruling was capped at 30% for the first 20 months, 20% for the second 20 months and 10% for the last 20 months. Based on the new proposals under the Tax Plan 2025, this will change. For 2025 and 2026, there will be a fixed maximum of 30% for all employees eligible for the 30% ruling. As of 1 January 2027, this percentage will be reduced to 27%. Transitional rules are proposed to apply for individuals who already received a tax free allowance under the 30% ruling prior to 2024. Based on historical changes, we expect that in practice it will be considered relevant if the 30% ruling was applied in the December 2023 payroll.
Salary norm: additional increase as of 2027 (on top of annual indexation)
The second announced change is an additional increase of the minimum salary threshold that an incoming employee should meet in order to be considered eligible for the 30% ruling. This additional increase will be on top of the annual indexation and will take place as of 1 January 2027. It concerns an increase of the regular salary norm of EUR 46,107 to EUR 50,436 and an increase of the lowered salary norm (applicable to employees under 30 years of age with a qualifying Master’s) from EUR 35,048 to EUR 38,338. We note that the increases are based on the 2024 amounts and do therefore not yet include the annual indexations. Also for this change, transitional rules are proposed to apply for individuals who already received a tax free allowance under the 30% ruling prior to 2024.
Cap of the tax-free allowance remains unchanged
The cap of the tax-free allowance that was introduced on 1 January 2024 by limiting the basis of the tax-free allowance to the regulated maximum remuneration for the public sector (EUR 233,000 in 2024 and EUR 246,000 in 2025, indexed annually) remains applicable, including the transitional rules under which this change only comes into force as of 1 January 2026 for individuals for whom the 30% ruling was applied in the last wage tax period of 2022.
Definitive abolishment of the partial non-residency regime as of 2025 (2027 in some cases)
The abolishment of the so-called partial non-resident taxpayer regime will not be reversed, which means that holders of the 30% ruling will no longer (almost completely) be exempt from paying taxes in Box 2 (substantial shareholding) and Box 3 (savings and investments) as of 1 January 2025 (or 1 January 2027 if the 30% ruling was applied in the last wage tax period of 2023). Instead, they become taxable in the Netherlands over their worldwide income (if they can be regarded as a Dutch tax resident).
Overview key dates
The announced changes further increase the complexity of the 30% ruling and the variety of transitional rules. For completeness’ sake, we have therefore included a high level overview of the key dates below:
1 January 2025:
1 January 2026: the cap of the tax-free allowance (based on the maximum remuneration for the public sector) will apply for all incoming employees as the transitional rules no longer apply.
1 January 2027:
Income tax – Relevant changes in Box 1 (employment and principal residence)
Preparation for a remote work arrangement in tax treaties with Belgium and Germany
The Netherlands is currently in discussions with neighboring countries Belgium and Germany about potentially including a remote working arrangement in the tax treaty. The goal of such an arrangement would be to agree that up to a certain number of days worked from the country of residence, the employment income in relation to those workdays will be allocated to the country of the employer under the tax treaty (instead of the country of residence).
As part of the Tax Plan 2025, a change in income tax legislation has been announced to anticipate such a remote work arrangement. This change (in the so-called ‘place of employment fiction’ for non-residents) aims to ensure the Netherlands can effectuate the right to tax the income related to workdays abroad. Furthermore, this change also provides a solution for tax issues in specific situations of seafarers for example between the Netherlands and Belgium.
At this stage, the exact status of the discussions regarding a remote work arrangement is not known, and it is unclear when we can expect the introduction of such an arrangement. However, it is anticipated that a remote work arrangement will include a maximum number of remote workdays (as an example, reference is currently made in the Tax Plan to 34 days per year), and will therefore not be a solution for the situation of ‘permanent remote workers’.
Change in Box 1 tax rate
The government has announced a limited reduction of the tax rate for income up to EUR 38,441 (first tax bracket). Furthermore, there will be a limited increase of the threshold for the top tax rate of 49.5%.
Income tax – Change in Box 2 tax rate (substantial interests)
As of 1 January 2024, Box 2 consists of two tax brackets. Initially, this was announced as a tax rate of 24.5% on taxable income from substantial interest up to EUR 67,000 and a tax rate of 31% on the excess. During the parliamentary discussion of the Budget Day plans last year, an amendment was passed to raise the top tax rate to 33% (which is currently applicable). As part of the Tax Plan 2025, it is proposed to reverse this additional increase of the top rate in order to bring the combined tax burden more in line with the effective top tax rate in Box 1. As of 1 January 2025, the top tax rate for Box 2 is therefore proposed to amount to 31% for income exceeding EUR 67,000. The 24.5% rate in the first bracket will remain unchanged.
Income tax – No change in Box 3 tax rate (personal investment income)
In the coalition agreement presented in May this year, a reduction of the Box 3 tax rate was announced. Based on the Tax Plan 2025, this reduction will not take place. This means that the current Box 3 tax rate of 36% remains applicable.
Under the 2023 tax law amendments, South Korea has introduced a new filing obligation for local subsidiaries or branches of foreign companies, as well as domestic business establishments of foreign corporations operating in the country. Effective 1 January 2024, these entities are required to submit a detailed transaction report on stock-based compensation provided to their executives and employees, provided that the foreign corporation is controlled by foreign shareholders. The deadline for filing this report is 10 March 2025.
Specifically, local subsidiaries or branches of foreign companies must report the following information to the South Korean tax authority when their executives or employees receive or exercise stock-based compensation (such as stocks, stock options, or share-value-equivalent bonuses) granted by the foreign parent company:
Vialto can provide additional information or support with this filing where desired. Please reach out to us to discuss.
Swiss employers have an obligation to file an equity appendix for all employees residing in the cantons of Geneva and Vaud, regardless of the employer’s location in Switzerland. Although this rule is not new, many Swiss employers remain unaware of their annual payroll obligations concerning equity reporting, regardless of whether any income is realized during the year.
As we have seen non-compliance with Swiss submission requirements for equity appendices become an area of focus for authorities, we have shared a refresh on the requirements below:
For employees residing in the canton of Geneva, equity appendices must be attached to their annual salary certificate or, where applicable, to the attestation-quittance, and provided to the employees. The Swiss employer must also send all equity appendices to the Geneva cantonal tax authorities. Employees are required to include both their salary certificate and the equity appendices with their Geneva tax return.
For employees living in the canton of Vaud, Swiss employers must first submit draft equity appendices to the Economic Competence Center PP at the beginning of each year, preferably by 31 January, for approval by the Vaud cantonal tax authorities. Once approved, the final equity appendices and the salary certificates must be submitted to the Vaud cantonal tax authorities via their dedicated employer platform or by regular mail before 28 February.
Other cantons may have similar processes in place. Should you require further information or assistance in this matter, please do not hesitate to contact us.
Vialto can assist in preparing your employees’ equity appendices and ensure all employer obligations are met in each canton. With direct contact with local authorities and extensive experience, we guarantee a quick, efficient process while ensuring full compliance with payroll and tax regulations.
For further information you may wish to refer to the following links:
Geneva Guidelines: https://www.ge.ch/imposition-participations-collaborateur
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
AmyLynn Flood
Americas, Global Equity Lead
Marc Bosotti
APAC, Regional Equity Lead
Gemma Ludwig
EMEA, Regional Equity Lead
Further information on Vialto Partners can be found here: www.vialtopartners.com
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