Employee Stock Plans 2010: Year-End International Reporting Requirements

This Commentary highlights some of the principal calendar and year-end reporting requirements for employee stock plans that U.S. companies most commonly encounter when offering these programs to their employees in selected jurisdictions worldwide. Please note that this Commentary does not address routine, year-end tax reporting obligations. A chart summarizing these items appears at the end of this Commentary. If you have any questions about these requirements or need any assistance, please do not hesitate to contact one of the Jones Day lawyers listed below.

Australia

Employers are subject to annual reporting requirements with respect to all equity grants to Australian employees. By July 14, 2011, Australian employers must issue an Employee Share Scheme Statement to each employee who vested in an equity award in the prior tax year, and by August 14, 2011, the employer must file an Employee Share Scheme Annual Report with the Australian Taxation Office ("ATO"). If taxation is deferred until a subsequent tax year, reporting to employees and the ATO will most likely not be required for 2010–2011. In any event, it is recommended that employees be provided with a statement about future reporting requirements.

Canada

Elimination of Tax Deferral Elections. Prior to March 4, 2010, for stock options granted over exchange traded shares with an exercise price equal to or exceeding the fair market value of the underlying shares at the date of grant (generally, "prescribed shares"), Canadian employees were generally permitted to defer tax on the spread of their options at exercise up to the first C$100,000 of any options that vested in a particular calendar year. Employees who desired to take advantage of this deferral were required to file a deferral election on Form T1212 with their employer by January 15 of the year following the year in which the options were exercised and with Canada Revenue Agency (with his/her annual tax return for each year while the income is deferred). This requirement now has been eliminated.

Effective March 4, 2010, the Canadian federal government eliminated this deferral election for stock options, and by extension, the requirement to file a Form T1212. Canadian employees who filed deferral elections prior to such date and whose tax liability is greater than the benefit received upon sale of the stock received upon exercise, however, may receive special tax relief on stock sold after 2009 and before 2015. This treatment generally reduces the taxes payable to the proceeds of disposition from the optioned securities. In order to take advantage of this special tax relief, employees must make an election by the filing due date of their personal tax return for the year in which they sell their stock. The tax relief will also apply retroactively for employees who sold their stock before 2010 as long as they make the election for special tax treatment on or before their tax filing due date for the 2010 taxation year.

China

Exchange Control Reports for Stock Options/Restricted Stock Units/Purchase Rights. For companies that have obtained SAFE registration for their equity plans in China, quarterly reports must be filed with the local SAFE officials detailing the company's equity plan activity (e.g., grants, exercises, share sales, and the balance of the designated foreign exchange account) during the previous quarter. The next report is due January 14, 2011 for activity that occurred during the fourth quarter of 2010.

In addition, for those companies with SAFE approval that provides for a designated quota of foreign currency that may be transferred out of China (e.g., under an employee stock purchase plan), companies must renew their foreign exchange quota for the 2011 calendar year. This renewal request should be made annually by the Chinese affiliate that employs the applicable participants and should be filed by December 31, 2010.

France

Tax Reporting for French-Qualified Awards. French affiliates of companies that grant stock options and/or restricted stock units ("RSUs") to their employees in France that are tax-qualified under the French Commercial Code1 must fulfill certain tax reporting requirements by February 2011.

With respect to French-qualified stock options, the French affiliate must provide each employee and its appropriate...