ESOP compliance checklist

What does ESOP compliance mean?

Regulatory requirements for ESOPs differ between countries. In most cases, the laws of the country where the issuing company is incorporated determine how share options are treated.

Beyond setting compliance obligations, this can also have a major impact on your company’s tax liabilities.

This checklist walks you through the main considerations when granting equity incentives to an international team.

6-step ESOP compliance checklist

Below are the essential compliance areas to address when managing equity incentives for hires overseas:

Tax treatment

It’s vital to know the withholding and reporting rules in every country where your team members are based. Incorrect filings in those jurisdictions can expose your business to penalties and fines.

For example, an employee might only owe equity taxes in their home country, yet your company could still be obliged to pay — or at minimum withhold — in both jurisdictions.

Consider your employees’ tax positions as well. Some countries — for example the UK — provide tax-advantaged schemes for employees, while others do not. When evaluating different equity award types by country, make sure you understand the tax-qualified programmes available and whether any of them could result in unfavourable tax treatment for your staff.

Employment laws

If you plan to grant share options to employees abroad, you must fully understand each country’s employment laws as they relate to equity.

For instance, certain jurisdictions may bar specific performance metrics from influencing equity grants, whereas others might forbid performance-based awards entirely. Some places permit companies to substitute cash for shares; others insist that all employees be offered the same asset types.

Complying with these rules is essential to avoid penalties.

Securities laws

Securities rules differ by country, and issuing share options can trigger registration or exemption filing requirements with local regulators.

Currency exchange

In some jurisdictions, restrictive foreign exchange controls apply to the purchase, sale or transfer of shares, which can affect how employees actually receive their equity benefits.

Reporting

Most jurisdictions require firms to report ESOP information to local tax authorities, regulators and employees, including disclosures about the plan’s financial risks and rewards.

Sound like a lot of work? Let Remote take care of it all for you

Navigating ESOPs and equity incentives is complex on its own, and the difficulty increases substantially once you operate across borders.

Fortunately, you can still grant equity incentives to your international team — without the time- and resource-heavy compliance headaches.

Via Remote Equity, we can:

• Review your equity plan and evaluate eligibility

• Provide advice and guidance on taxable events

• Ensure tax withholding and reporting comply with local rules

To find out how Remote can help you offer equity incentives with ease, speak to one of our friendly experts today.