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

2018 Global Employee Equity at a glance: Hong Kong

Welcome to the Hong Kong page of our Global Employee Equity at a glance series. To view other countries in this series, please visit our 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 are laws that prohibit discrimination, and/or less favorable treatment of, employees on certain grounds including 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 Plan documents be translated.

Government filings may generally be made in English.

Electronic execution of award agreements is permitted provided certain conditions, which are not onerous, are met.

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Stock Option Plans: Regulatory

Securities Compliance

Neither the grant nor the exercise of Options is likely to trigger any securities or prospectus requirements provided: (i) participation in the Plan is offered to employees only; and (ii) the Plan documentation contains specific wording that applies when the exemption is relied upon.

Foreign Exchange

There are no foreign exchange restrictions applicable to the Plan.

Data Protection

In Hong Kong, employers are required to notify employees in a Personal Information Collection Statement of, among other things, the purpose for the collection of data and whether it is obligatory or voluntary for the employee to supply the data and, where it is obligatory, the consequences for the employee if he or she does not provide the data requested. There is generally no requirement to register data processing activities and databases with the local data protection authorities.

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Stock Option Plans: Tax

Employee Tax Treatment

An employee is generally subject to income tax on the gain on exercise (i.e., the excess of the market value of the Stock acquired over the aggregate exercise price).

No tax is payable on the gain upon sale of the Stock.

Social Security Contributions

Social security contributions are not payable.

Tax-Favored Program

There is no tax-favored program applicable to the Plan.

Withholding and Reporting

The Subsidiary does not have any withholding obligations.

The Subsidiary must report any taxable benefit arising from the exercise of the Options as part of its normal annual return of compensation paid to its employees. Employees are also responsible for reporting the taxable benefit in their own tax returns and for paying the applicable tax.

Employer Tax Treatment

Obligations fulfilled by issuing new shares are not usually deductible. Where the obligations are met by acquiring shares from the market, the costs incurred in the acquisition are usually allowable deductions when the vesting conditions have been satisfied. A deduction is generally available if the Subsidiary reimburses the Issuer for costs of the Plan subject to certain requirements.

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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 are laws that prohibit discrimination, and/or less favorable treatment of, employees on certain grounds including 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 Plan documents be translated.

Government filings may generally be made in English.

Electronic execution of award agreements is permitted provided certain conditions, which are not onerous, are met.

[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 or prospectus requirements provided that: (i) participation in the Plan is offered to employees only; and (ii) the Plan documentation contains specific wording that applies when the exemption is relied upon.

Foreign Exchange

There are no foreign exchange restrictions applicable to the Plan.

Data Protection

In Hong Kong, employers are required to notify employees in a Personal Information Collection Statement of, among other things, the purpose for the collection of data and whether it is obligatory or voluntary for the employee to supply the data and, where it is obligatory, the consequences for the employee if he or she does not provide the data requested. There is generally no requirement to register data processing activities and databases with the local data protection authorities.

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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.

No tax is payable on the gain upon sale of the Stock.

Social Security Contributions

Social security contributions are not payable.

Tax-Favored Program

There is no tax-favored program applicable to the Plan.

Withholding and Reporting

The Subsidiary does not have any withholding obligations.

The Subsidiary must report any taxable benefit arising from the Plan as part of its normal annual return of compensation paid to its employees. Employees are also responsible for reporting the taxable benefit in their own tax returns and paying the applicable tax.

Employer Tax Treatment

Obligations fulfilled by issuing new shares are not usually deductible. Where the obligations are met by acquiring shares from the market, the costs incurred in the acquisition are usually allowable deductions when the vesting conditions have been satisfied. A deduction is generally available if the Subsidiary reimburses the Issuer for costs of the Plan subject to certain requirements.

[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 are laws that prohibit discrimination, and/or less favorable treatment of, employees on certain grounds including 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.

Salary deductions for the purposes of the Plan may be technically prohibited and it is recommended that alternative arrangements are made for payment of the purchase price.

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 Plan documents be translated.

Government filings may generally be made in English.

Electronic execution of award agreements is permitted provided certain conditions, which are not onerous, are met.

[Go back to top of page]

 

Employee Stock Purchase Plans: Regulatory

Securities Compliance

No securities or prospectus requirements will be triggered provided: (i) participation in the Plan is offered to employees only; and (ii) the Plan documentation contains specific wording that applies when the exemption is relied upon.

Foreign Exchange

There are no foreign exchange restrictions applicable to the Plan.

Data Protection

In Hong Kong, employers are required to notify employees in a Personal Information Collection Statement of, among other things, the purpose for the collection of data and whether it is obligatory or voluntary for the employee to supply the data and, where it is obligatory, the consequences for the employee if he or she does not provide the data requested. There is generally no requirement to register data processing activities and databases with the local data protection authorities.

[Go back to top of page]

 

Employee Stock Purchase Plans: Tax

Employee Tax Treatment

An employee is generally subject to income tax on the value of the discount when Stock is purchased.

No tax is payable on the gain upon sale of the Stock.

Social Security Contributions

Social security contributions are not payable.

Tax-Favored Program

There is no tax-favored program applicable to the Plan.

Withholding and Reporting

The Subsidiary does not have any withholding obligations.

The Subsidiary must report any taxable benefit arising from the Plan as part of its normal annual return of compensation paid to its employees. Employees are also responsible for reporting the taxable benefit in their own tax returns and for paying the applicable tax.

Employer Tax Treatment

Obligations fulfilled by issuing new shares are not usually deductible. Where the obligations are met by acquiring shares from the market, the costs incurred in the acquisition are usually allowable deductions when the vesting conditions have been satisfied. A deduction is generally available if the Subsidiary reimburses the Issuer for costs of the Plan subject to certain requirements.

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Global Employee Equity at a glance

Employment, Compensation & Benefits practice group

 

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