2018 Global Employee Equity at a glance: Brazil | White & Case LLP International Law Firm, Global Law Practice
2018 Global Employee Equity at a glance: Brazil

2018 Global Employee Equity at a glance: Brazil

Welcome to the Brazil page of our Global Employee Equity at a glance series. To view other countries in this series, please visit our 2018 Global Employee Equity at a glance page.

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TABLE OF CONTENTS

Stock Option Plans
Employment
Regulatory
Tax

Restricted Stock and RSUs
Employment
Regulatory
Tax

Employee Stock Purchase Plans
Employment
Regulatory
Tax

 

Stock Option Plans: Employment

Labor Concerns

There is a risk of employees claiming that they are entitled to compensation for loss of rights under the Plan where the Plan is amended or discontinued or  where their employment is terminated. There is also a risk of employees claiming that the underlying value of the Option should be taken into account as employment income when determining the extent of their labor and social security rights.

In addition, entitlement issues may arise if options are granted frequently. This is because, traditionally, benefits granted on a regular basis are considered to be part of an employee's compensation.

If the options are granted through cashless transactions, the risk of the employee requesting the integration of those amounts as salary basis for the calculation of all labor and social security rights is increased (note that the value of the investment cannot be derisory compared to the value of the stock in the market). To reduce the risk of potential claims to employee entitlements, employees should expressly agree in option award agreements that participation in the Plan is discretionary and that options result in an investment opportunity subject to the risks inherent in stock investment. While payroll deductions may be problematic, the risk is mitigated by obtaining the written consent of the employee.

There are laws that prohibit discrimination against, and/or less favorable treatment of, employees on certain grounds, including age, gender, disability and part-time status. Companies should be mindful of this when determining the eligibility of employees to participate in the Plan, the benefits being granted and the exercise of any discretion.

Communications

A disclaimer should be included in the award agreement that acknowledges each employee's receipt of the Plan documents and the discretionary nature of the Plan and confirms that termination of employment will result in the loss of unvested rights.

Although there is no legal requirement to do so, it is recommended that the Plan documents be translated into Portuguese.

Government filings must be in Portuguese.

Electronic execution of award agreements is permitted.

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Stock Option Plans: Regulatory

Securities Compliance

Neither the grant nor the exercise of Options is likely to trigger any securities requirements.

Foreign Exchange

The employee or Subsidiary may generally remit funds abroad. To do so, the Subsidiary must present a letter to the bank in charge of the transaction containing certain information, including the names and individual taxpayer enrollment numbers (CPF) of the participants and the amounts to be remitted by the employee. The Subsidiary should confer with the bank regarding any supporting documentation that may be required.

Data Protection

Processing of employee data for purposes directly connected to the employment relationship can generally be justified on the basis that the processing is necessary to fulfill the contract of employment. Purposes outside that category need to be assessed on a case-by-case basis, and opt-in consent may be required in some cases.

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Stock Option Plans: Tax

Employee Tax Treatment

An employee is generally not subject to income tax at the time of grant or exercise of an Option, provided that the Options are not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Tax is payable on the gain upon the net proceeds of sale of the Stock where the total proceeds exceed R$20,000 (where Stock is sold on the Brazilian Stock Exchange) or R$35,000 (in all other cases) within any given month.

Social Security Contributions

Social security contributions are generally not payable by the employee or the Subsidiary, provided that the Options are not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Tax-Favored Program

There is no tax-favored program applicable to option plans.

Withholding and Reporting

The Subsidiary does not generally have any withholding or reporting obligations, provided that the Options are not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Employees may be subject to minor annual reporting requirements for any rights and/or assets held outside of Brazil.

Employer Tax Treatment

A deduction is generally available if the Subsidiary reimburses the Issuer for the costs of the Plan and participation in the Plan is offered to all employees of the Subsidiary. A written reimbursement agreement is required. However, such a recharge will increase the likelihood of the Plan being deemed to form part of an employee's regular employment income, which may trigger tax and social security charges.

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Restricted Stock and RSUs: Employment

Labor Concerns

There is a risk of employees claiming that they are entitled to compensation for loss of rights under the Plan where the Plan is amended or discontinued or  where their employment is terminated. There is also a risk of employees claiming that the underlying value of the Restricted Stock or RSUs should be taken into account as employment income when determining the extent of their labor and social security rights.

In addition, entitlement issues may arise if options are granted frequently. This is because, traditionally, benefits granted on a regular basis are considered to be part of an employee's compensation.

As RSUs are usually granted through cashless transactions, there will be a risk of the employee requesting the integration of those amounts as salary and therefore basis for the calculation of all labor and social security rights.There are laws that prohibit discrimination against, and/or less favorable treatment of, employees on certain grounds, including age, gender, disability and part-time status. Companies should be mindful of this when determining the eligibility of employees to participate in the Plan, the benefits being granted and the exercise of any discretion.

Communications

A disclaimer should be included in the award agreement that acknowledges each employee's receipt of the Plan documents and the discretionary nature of the Plan and confirms that termination of employment will result in the loss of unvested rights.

Although there is no legal requirement to do so, it is recommended that the Plan documents be translated into Portuguese.

Government filings must be in Portuguese.

Electronic execution of award agreements is permitted.

[Go back to top of page]

 

Restricted Stock and RSUs: Regulatory

Securities Compliance

Neither the grant nor the vesting of Restricted Stock or RSUs is likely to trigger any securities requirements.

Foreign Exchange

There are no foreign exchange issues applicable to the Plan.

Data Protection

Processing of employee data for purposes directly connected to the employment relationship can generally be justified on the basis that the processing is necessary to fulfill the contract of employment. Purposes outside that category need to be assessed on a case-by-case basis, and opt-in consent may be required in some cases.

[Go back to top of page]

 

Restricted Stock and RSUs: Tax

Employee Tax Treatment

For Restricted Stock, an employee is generally subject to income tax on the value of the Restricted Stock when it vests.

For RSUs, an employee is generally subject to income tax on the value of the Stock received on vesting.

Tax is payable on the gain upon the net proceeds of sale of the Restricted Stock or Stock where the total proceeds exceed R$20,000 (where Stock is sold on the Brazilian Stock Exchange) or R$35,000 (in all other cases) within any given month.

Social Security Contributions

Social security contributions are generally not payable by the employee or the Subsidiary, provided that the Restricted Stock and RSUs are not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Tax-Favored Program

There is no tax-favored program applicable to restricted stock and RSU plans.

Withholding and Reporting

The Subsidiary does not generally have any withholding or reporting obligations, provided that the Stock is not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Employees may be subject to minor annual reporting requirements for any rights and/or assets held outside of Brazil.

Employer Tax Treatment

A deduction is generally available if the Subsidiary reimburses the Issuer for costs of the Plan and participation in the Plan is offered to all employees of the Subsidiary. A written reimbursement agreement is required. However, such a recharge will increase the likelihood of the Plan being deemed to form part of an employee's regular employment income, which may trigger tax and social security charges.

[Go back to top of page]

 

Employee Stock Purchase Plans: Employment

Labor Concerns

There is a risk of employees claiming that they are entitled to compensation for loss of rights under the Plan where the Plan is amended or discontinued or  where their employment is terminated. There is also a risk of employees claiming that the underlying value of the Stock should be taken into account as employment income when determining the extent of their labor and social security rights.

In addition, entitlement issues may arise if options are granted frequently. This is because, traditionally, benefits granted on a regular basis are considered to be part of an employee's compensation.

If the options are granted through cashless transactions, the risk of the employee requesting the integration of those amounts as salary basis for the calculation of all labor and social security rights is increased (note that the value of the investment cannot be derisory compared to the value of the stock in the market). To reduce the risk of potential claims to employee entitlements, employees should expressly agree in option award agreements that participation in the Plan is discretionary and that options result in an investment opportunity subject to the risks inherent in stock investment. While payroll deductions may be problematic, the risk is mitigated by obtaining the written consent of the employee.

There are laws that prohibit discrimination against, and/or less favorable treatment of, employees on certain grounds, including age, gender, disability and part-time status. Companies should be mindful of this when determining the eligibility of employees to participate in the Plan and the exercise of any discretion.

Communications

A disclaimer should be included in the award agreement that acknowledges each employee's receipt of the Plan documents and the discretionary nature of the Plan and confirms that termination of employment will result in the loss of unvested rights.

Although there is no legal requirement to do so, it is recommended that the Plan documents be translated into Portuguese.

Government filings must be in Portuguese.

Electronic execution of award agreements is permitted.

[Go back to top of page]

 

Employee Stock Purchase Plans: Regulatory

Securities Compliance

The offer of purchase rights does not trigger any securities requirements.

Foreign Exchange

The employee or Subsidiary may generally remit funds abroad. To do so, the Subsidiary must present a letter to the bank in charge of the transaction containing certain information, including the names and individual taxpayer enrollment numbers (CPF) of the participants and the amounts to be remitted by the employee. The Subsidiary should confer with the bank regarding any supporting documentation that may be required.

Data Protection

Processing of employee data for purposes directly connected to the employment relationship can generally be justified on the basis that the processing is necessary to fulfill the contract of employment. Purposes outside that category need to be assessed on a case-by-case basis, and opt-in consent may be required in some cases.

[Go back to top of page]

 

Employee Stock Purchase Plans: Tax

Employee Tax Treatment

An employee is generally not subject to income tax on the value of any discount when the Stock is purchased, provided that the Stock is not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Tax is payable on the gain upon the net proceeds of sale of the Stock where the total proceeds exceed R$20,000 (where Stock is sold on the Brazilian Stock Exchange) or R$35,000 (in all other cases) within any given month.

Social Security Contributions

Social security contributions are generally not payable by the employee or the Subsidiary, provided that the Stock is not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Tax-Favored Program

There is no tax-favored program applicable to employee stock purchase plans.

Withholding and Reporting

The Subsidiary does not generally have any withholding or reporting obligations, provided that the Stock is not considered to be part of an employee's regular compensation and the Subsidiary does not reimburse the Issuer for the costs of the Plan.

Employees may be subject to minor annual reporting requirements for any rights and/or assets held outside of Brazil.

Employer Tax Treatment

A deduction is generally available if the Subsidiary reimburses the Issuer for costs of the Plan and participation in the Plan is offered to all employees of the Subsidiary. A written reimbursement agreement is required. However, such a recharge will increase the likelihood of the Plan being deemed to form part of an employee's regular employment income, which may trigger tax and social security charges.

[Go back to top of page]

 

2018 Global Employee Equity at a glance

Employment, Compensation & Benefits practice group

 

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