Banner

Insights

GlobalAdvantage™ Equity Awards

Are you meeting the tax withholding requirements on equity compensation awarded to employees who work in more than one country?

Your challenge
Businesses routinely use stock options and other forms of equity-based compensation to reward employees. As companies continue to expand globally, the employees receiving those awards are more likely to reside in multiple countries during the lifetime of a share option or other award.

Equity awards to mobile employees create tax compliance requirements for you as an employer in multiple jurisdictions. Two or more countries may seek tax in relation to an award. Reporting and withholding obligations can arise in a country long after an employee has left. These must be met within a few days of an award vesting or the exercise of an option.

Errors in complying with such requirements can be costly. Incorrect tax withholding or reporting of share-related events can result in penalties levied by multiple tax authorities. In fact, several organizations with large expatriate populations have paid large fines for failing to deposit the appropriate withholding. Increasingly, governments are enforcing the withholding rules more stringently than ever before.

More than ever, multinational businesses need the ability to properly determine withholding taxes on equity-based transactions. At the same time, they must satisfy the internal demand to settle awards, net of tax withholding, to their employees in a very short time frame following a transaction.

Calculating the withholding and reporting requirements for mobile employees can be a complicated, time-consuming, and costly process. It requires specialised global equity tax knowledge as well as a strong understanding of compliance requirements specific to different countries. In the past, employers have either relied on internal equity tax teams to undertake the burdensome task of running calculations in-house, or they have turned to a service provider on a per diem or bureau-type basis for a set fee. This process has traditionally been manual and very labor intensive, which often requires a significant amount of time to perform. Implementing an automated approach that can help companies complete their requirements and address this complex process easily and efficiently is a growing need for many organisations.

Deloitte can help.

Our approach
Deloitte’s GlobalAdvantage (GA) Equity Awards tool helps companies more easily manage the tax and social security withholding and reporting requirements associated with stock awards for both local and mobile employees. Our tool will provide employer withholding tax calculations within seconds for equity compensation in more than 100 countries, for both local and national employees, as well as employees who have worked in multiple tax jurisdictions (countries or regions) during the life of the award.

GA equity awards supports organisations that have employees with equity awards in a large number of countries, for which there are numerous annual equity transactions (e.g., stock option exercises, share or share unit vestings). Using advanced Web services technology, our tools help you calculate complex multi-country withholding scenarios in real time for numerous country and/or state combinations. GA equity awards reduces your administrative burden by interfacing directly with existing systems or service providers for demographic and share transaction data. We have established interface protocols with many of the largest equity administrators, and others are being added.

GA equity awards offers many benefits, including:

  • Technical excellence – You gain access to Deloitte’s deep technical knowledge of equity compensation and global mobility regulations via state-of-the-art technology.
  • Flexibility – Use of Web services allows us to interface easily and securely with other systems and providers.
  • Delivery – GA Equity Awards helps you deliver share plan transaction proceeds to employees within tight time frames by producing real-time calculations in a matter of seconds, even for very complex scenarios.
  • Broad coverage – GA Equity Awards calculates national, regional, and social taxes for 90 countries and all U.S. states, Canadian provinces, Swiss cantons, and Italian regions. It handles computations for all types of equity plans, domestic calculations, U.S. state-by-state calculations, and modeling calculations.
  • Scalability – You can select the countries and plans to be automated, and GA Equity Awards can be reconfigured over time to reflect the accuracy and sophistication of the participant data available.
  • High-volume management – Equipped with a substantial number of back-up servers to deal with load balancing, GA Equity Awards can handle large transaction volumes with ease.

GA equity awards is already delivering significant value to global organizations. A multinational energy company used GA Equity Awards to handle a large volume of stock transactions associated with a spike in its share price.

The company completed nearly 10,000 calculations involving 90 countries, including predictive modeling calculations, to manage the compliance risk associated with equity for multinational and local employees. The solution facilitated settlement comfortably within the required T+3 (transaction plus three days) time frame.

Whether you manage your awards program in-house or through your administrator, GA Equity Awards can help address compliance requirements while serving the needs of your employees.

The Deloitte difference
If your company is looking to improve its global equity compensation management, Deloitte’s Global Employer Services (GES) team can help. Our multidisciplinary teams include compensation, tax, and technology specialists who bring a broad view to today’s complex problems. The result: high quality services for our clients.

Our GES Global Rewards Group offers:

  • A dedicated national team that understands the tax implications of today’s rewards programs.
  • GA Equity Awards, an advanced, Web-services-based tool that, when combined with deep understanding of rewards programs and tax requirements in multiple jurisdictions, can support your company as it fulfill its commitments to employees and simultaneously complies with applicable tax laws.
  • A focus on aligning your rewards programs tax-efficiently with your business goals and strategies and in compliance with laws and regulations.
  • The single-source efficiency of integrated tax and human capital services, delivered through an approach that harmonizes tax, accounting, actuarial, ERP, and other business functions.
  • Access to the specialized and extensive resources of Deloitte, its U.S. subsidiaries, and the member firms of Deloitte Touche Tohmatsu and their affiliates.
Did you find this useful?

Related topics