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

2018 Global Employee Equity at a glance: Spain

Welcome to the Spain 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

The Plan benefits are considered part of an employee's salary for the purposes of calculating entitlements on termination of employment.

There is a risk that an employee dismissed without cause may be treated by a court as a good leaver.

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. If any discrepancy arises and documents need to be presented to a Spanish court, official translations would be required.

Government filings must be made in Spanish.

Electronic execution of award agreements may be acceptable under certain conditions, which are not onerous.

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Stock Option Plans: Regulatory

Securities Compliance

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

Foreign Exchange

Spanish resident individuals must make an annual filing with the Spanish Securities and Exchange Commission (the "Comisión Nacional del Mercado de Valores"), for administrative and statistical purposes, declaring their interests in foreign securities.

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. In all cases, companies should provide employees with a privacy notice describing what personal data is being collected and how the data is being used (including details of data sharing with third parties).

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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).

Capital gains tax is also payable on any gain upon the net proceeds of sale of the Stock.

Social Security Contributions

Social security contributions are due from both the Subsidiary and the employee on all income received up to a threshold (which is subject to change on an annual basis). If employees exceed this threshold, social security contributions will not be due on the exercise of Options. Employer's social security contributions cannot be passed onto employees.

Tax-Favored Program

Any gain up to an annual limit of €12,000 is exempt from tax, provided that all current employees of the group are eligible to participate on the same terms and conditions.

In addition, 30 percent of the gain arising from the exercise of Options will be exempt from tax provided: (i) the Options do not vest on a regular or recurrent basis and the Options vest over a period of more than two years; (ii) this reduction has not been applied for the last five years; and (iii) such gain does not exceed either €300,000 or the amount resulting from multiplying the annual average salary by the vesting period. Additional limits to the reduction may  apply. Any excess over this limit will not benefit from the reduction.

Withholding and Reporting

The Subsidiary has an obligation to withhold the income tax and social security contributions (if the threshold has not been met) due on the excess of the market value of the Stock acquired over the exercise price when the employee becomes entitled to sell the Stock.

Reporting requirements apply to both the Subsidiary and the employee.

Employer Tax Treatment

A deduction is available if the Subsidiary reimburses the Issuer for costs of the Plan. A written reimbursement agreement is required (setting out the criteria used to establish the amount to be paid by the Subsidiary).

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Restricted Stock and RSUs: Employment

Labor Concerns

Plan benefits are considered part of an employee's salary for the purposes of calculating entitlements on termination of employment.

There is a risk that an employee dismissed without cause may be treated by a court as a good leaver.

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. If any discrepancy arises and documents need to be presented to a Spanish court, official translations would be required.

Government filings must be made in Spanish.

Electronic execution of award agreements may be acceptable under certain conditions, which are not onerous.

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Restricted Stock and RSUs: Regulatory

Securities Compliance

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

Foreign Exchange

Spanish resident individuals must make an annual filing with the Spanish Securities and Exchange Commission (the "Comisión Nacional del Mercado de Valores"), for administrative and statistical purposes, declaring their interests in foreign securities.

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. In all cases, companies should provide employees with a privacy notice describing what personal data is being collected and how the data is being used (including details of data sharing with third parties).

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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.

Capital gains tax is also payable on any gain upon the net proceeds of the sale of the Restricted Stock or Stock.

Social Security Contributions

Social security contributions are due from both the Subsidiary and the employee on all income received up to a threshold (which is subject to change on an annual basis). If employees exceed this threshold, social security contributions will not be due on income from the Restricted Stock or Stock (as applicable) on vesting. Employer's social security contributions cannot be passed onto the employees.

Tax-Favored Program

Any gain up to an annual limit of €12,000 is exempt from tax, provided that all current employees of the group are eligible to participate on the same terms and conditions.

In addition, 30 percent of the gain arising from the vesting of Restricted Stock or Stock will be exempt from tax if: (i) the Restricted Stock or Stock do not vest on a regular or recurrent basis and the Restricted Stock or Stock vest over a period of more than two years; (ii) this reduction has not been applied for the last five years; and (iii) such gain does not exceed either €300,000 or the amount resulting from multiplying the annual average salary by the vesting period. Additional limits to the reduction may also apply. Any excess over this limit will not benefit from the reduction.

Withholding and Reporting

The Subsidiary has an obligation to withhold the income tax and social security contributions (if the threshold has not been met) due on the excess of the market value of the Restricted Stock or Stock acquired over the exercise price when the employee becomes entitled to sell the Restricted Stock or Stock.

Reporting requirements apply to both the Subsidiary and the employee.

Employer Tax Treatment

A deduction is available if the Subsidiary reimburses the Issuer for costs of the Plan. A written reimbursement agreement is required (setting out the criteria used to establish the amount to be paid by the Subsidiary).

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Employee Stock Purchase Plans: Employment

Labor Concerns

Plan benefits are considered part of an employee's salary for the purposes of calculating entitlements on termination of employment.

There is a risk that an employee dismissed without cause may be treated by a court as a good leaver.

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. If any discrepancy arises and documents need to be presented to a Spanish court, official translations would be required.

Government filings must be made in Spanish.

Electronic execution of award agreements may be acceptable under certain conditions, which are not onerous.

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Employee Stock Purchase Plans: Regulatory

Securities Compliance

It is possible that a prospectus will be required for participation in the Plan to be offered to employees in Spain. However, certain exemptions, exclusions and interpretations may be applicable and, in practice, a prospectus is rarely required. For example, offers made to no more than 150 persons in any one Member State are exempt and certain Issuers, including those incorporated or listed in a Member State, are required only to publish summary information  about the Plan and the Stock in substitution for a prospectus. Where a prospectus is required, the Issuer may be able to take advantage of a short form regime under which certain requirements for the prospectus' contents are waived. Any prospectus must be approved by the relevant regulatory authority in the Issuer's Home Member State and filed under the passporting system with  the relevant regulatory authority of each Member State in which participation in the Plan is being offered.

Foreign Exchange

Spanish resident individuals must make an annual filing with the Spanish Securities and Exchange Commission (the "Comisión Nacional del Mercado de Valores"), for administrative and statistical purposes, declaring their interests in foreign securities.

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. In all cases, companies should provide employees with a privacy notice describing what personal data is being collected and how the data is being used (including details of data sharing with third parties).

[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 any discount when the Stock is purchased.

Capital gains tax is also payable on any gain upon the net proceeds of sale of the Stock.

Social Security Contributions

Social security contributions are due from both the Subsidiary and the employee on all income received up to a threshold (which is subject to change on an annual basis). If employees exceed this threshold, social security contribution will not be due on income from the purchase of Stock under the Plan. Employer's social security contributions cannot be passed onto the employees.

Tax-Favored Program

Any gain up to an annual limit of €12,000 is exempt from tax, provided that all current employees of the group are eligible to participate on the same terms and conditions.

Withholding and Reporting

The Subsidiary has an obligation to withhold the income tax and social security contributions (if the threshold has not been met) due on the excess of the market value of the Stock acquired over the exercise price when the employee becomes entitled to sell the Stock.

Reporting requirements apply to both the Subsidiary and the employee.

Employer Tax Treatment

A deduction is available if the Subsidiary reimburses the Issuer for the costs of the Plan. A written reimbursement agreement is required (setting out the criteria used to establish the amount to be paid by the Subsidiary).

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2018 Global Employee Equity at a glance

Employment, Compensation & Benefits practice group

 

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