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

2018 Global Employee Equity at a glance: Taiwan

Welcome to the Taiwan 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 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.

Government filings must be made in Chinese.

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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 provided that offers are made to no more than 99 employees or officers of the Subsidiary.

Foreign Exchange

Approval from the Central Bank is required for any remittances which in a calendar year exceed:

(i) US$50 million for the Subsidiary; or

(ii) US$5 million for a Taiwanese resident.

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

Generally, no capital gains tax is payable on the sale of Stock.

Social Security Contributions

Dividends are subject to a supplemental National Health Insurance premium of around two percent (subject to annual review).

Tax-Favored Program

There is no tax-favorable program applicable to Stock Option Plans.

Withholding and Reporting

The Subsidiary has no obligation to withhold tax unless the Subsidiary reimburses the Issuer for the costs of the Plan.

The Subsidiary is required to file a non-withholding statement relating to employment income by January of each year. Minor employee reporting requirements may apply, depending on the size of the transaction.

Employer Tax Treatment

A tax deduction may be available if the Subsidiary reimburses the Issuer for the costs of the Plan benefits under a written agreement and such costs are characterized as employee remuneration.

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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 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.

Government filings must be made in Chinese.

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Restricted Stock and RSUs: Regulatory

Securities Compliance

Participation in the Plan will be exempt from securities law requirements if the offers are made to fewer than 99 employees or officers of the Subsidiary.

Foreign Exchange

Approval from the Central Bank is required for any remittances which in a

calendar year exceed:

(i) US$50 million for the Subsidiary; or

(ii) US$5 million for a Taiwanese resident.

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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Restricted Stock and RSUs: Tax

Employee Tax Treatment

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

Interest accruing on payroll deductions, which are held in a separate trust account with a bank in Taiwan prior to the acquisition of Stock, may give rise to an income tax liability.

Employee income derived from offshore sources (including payroll and interest accrued) may be subject to income tax if the aggregate amount of their income (including the offshore income) for the calendar year is NT$6.7 million. Where the aggregate amount of the offshore income for the calendar year is less than NT$1 million, such offshore income will not be included in determining whether the threshold of NT$6.7 million has been met.

Generally, no capital gains tax is payable on the sale of the Stock.

Social Security Contributions

Dividends are subject to a supplemental National Health Insurance premium of around two percent (subject to annual review).

Tax-Favored Program

There is no tax-favorable program applicable to employee Stock Purchase Plans.

Withholding and Reporting

The Subsidiary has no obligation to withhold tax, unless the Subsidiary reimburses the Issuer for the costs of the Plan.

The Subsidiary is required to file a non-withholding statement relating to employment income by January of each year. Minor employee reporting requirements may apply, depending on the size of the transaction.

Employer Tax Treatment

A tax deduction may be available if the Subsidiary reimburses the Issuer for the costs of the Plan under a written reimbursement agreement and such costs are characterized as employee remuneration.

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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 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.

Government filings must be made in Turkish.

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

Neither the grant nor the exercise of Options is likely to trigger any prospectus requirements or the requirement to obtain the approval of the Capital Markets Board of Turkey, provided that:

(i) all aspects of the Plan are operated outside of Turkey;

(ii) the Option is not granted in such a way as to constitute a "public offering"; and

(iii) the information provided to the employees does not include indications of a public offering (e.g., there must be no use of mass media communication or general solicitation).

Foreign Exchange

Residents of Turkey may only purchase shares (or beneficial interests therein) traded in markets outside of Turkey through banks or authorized institutions licensed in Turkey or other duly authorized intermediary institutions.

Data Protection

Employee consent for the processing and transfer of personal data is a recommended method of compliance with existing data privacy requirements. Generally, an employer must register data processing activities and databases with the local data protection authorities.

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Employee Stock Purchase 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, provided that the Subsidiary reimburses the costs of the Plan to the Issuer.

Tax-Favored Program

There is no tax-favored program applicable to Stock Option Plans.

Withholding and Reporting

The Subsidiary only has an obligation to withhold the income tax and social security contributions (if the threshold has not been met) where it reimburses the costs of the Plan to the Issuer.

Reporting requirements apply to the Subsidiary where it reimburses the Issuer for the costs of the Plan. Reporting requirements apply to the employee where the Subsidiary does not have a withholding obligation.

Employer Tax Treatment

A deduction may be 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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2018 Global Employee Equity at a glance

Employment, Compensation & Benefits practice group

 

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