Global Update—What’s New and What’s Changing?

Sally Blanchflower, Managing Associate, Tapestry ComplianceBob Grayson, Partner, Tapestry Compliance

Joanna Mak, Senior Manager Share Plans, BramblesKevin O’Hare, Group Share Plans Manager, HSBC

Introducing our Speakers

Kevin O’HareHSBC, Group Share Plans Manager

Joanna MakBrambles, Senior Manager Share Plans

Bob GraysonTapestry Compliance, Partner

Sally Blanchflower Tapestry Compliance, Managing Associate

About HSBC• One of the world’s largest banking and financial services organisations• HQ in London, UK and dual listed on the London Stock Exchange (LSE) and Hong Kong Stock Exchange (HKEX)• 37 million customers globally• Over 246,000 employees globally• Offers equity to employees in 70 jurisdictions

About Brambles • Supply-chain logistics company operating in more than 60 countries• Largest operations in North America and Western Europe• HQ in Sydney, Australia and listed on Australian Securities Exchange (ASX)• Over 14,500 employees globally• Offers equity to employees in 40 countries

Today’s Topics & ThemeRome: • Changing but recognisably the same… • Global!• The Eternal City!

Share plans:• Changing but recognisably the same…• Global! - multipolar• The Eternal Challenge!

Increased Focus on Global Compliance• Risks of non-compliance

o Fines and jail timeo Increased costso Non-enforceabilityo Reputationo HR blowbacko Prevents smooth operation

• Increased focus on value for moneyo Cost effective, risk based approacho Plain vanilla plans are no longer rocket science!o Manage risk and create auditable processo Plan over several yearso Manage costs

Practical Challenges!

• Cost / benefit• Budget•Different stakeholders• Regulation• Prioritisation

Annual Global Tax Filings: give unto Caesar…CountryTax Year End

Form Filing deadline

Australia30 June

ESS Statement to each employee Employee Share Scheme (ESS) Annual Report to the Australian Tax Office (ATO)

14 July - ESS statements 14 August - ESS annual report

Hong Kong31 March

Annual Employer's Return (Form IR56B) – to the revenue and to employees

30 April

Ireland31 December or fiscal tax year end

Form RSS1 – to the revenue 31 March

Japan31 December

Annual statement (Form 9(3)) – to the revenue 31 March

Portugal31 December

Form Modelo 19 – to the revenue 30 June

UK5 April

Online report to the revenue 6 July

Global Tax Rates Change!Changes with calendar years for many countries but some in–year Recent changes (2017)

Brazil Kazakhstan

Czech Republic Kenya

Chile Luxembourg

China Macau

Denmark Malta

Egypt Monaco

Ireland Netherlands

Israel Norway

Slovakia Uzbekistan

Uruguay South Africa

Global Tax Rates: some go up, some go down…Country Rate

Chile • Top marginal tax rate reduced from 40% to 35%

Brazil • Capital gains tax increased from 15% to 22.5% (postponed from 1 January 2016)

Luxembourg • Top marginal tax rate increased from 40% to 42% for income over EUR200,000

• Additional 41% rate added for income over EUR150,000

Norway • Top ordinary tax rates reduced from 25% to 24%• Increases in state taxes limit benefit of reduction• Capital gains and dividends tax increased from 28.75% to 29.76%

Slovakia • Dividends now taxed at flat rate of 7%• Increases to 35% if company paying dividends is not registered in a

jurisdiction which has a tax treaty with Slovakia

South Africa • New top tax rate of 45%• Capital gains tax increased from 16.4% to 18%• Dividend rate increased from 15% to 20%

Tax Filing & Reporting

• Increasingly on-line • Some countries already do this:o UK, Ireland, Australia, New Zealand

•Will become the norm in other countries over time?

Tax Filing & Reporting: Japan

• Employer reporting now includes non-residentsand former employees/directors• For share incentives received from 1 January 2016• First reporting was 31 March 2017 • Likely to significantly increase the reporting burden for employers

Tax Qualified Plans

• Started in the UK and the U.S.• Becoming a global phenomenono France, Ireland, Israel now well-establishedoMany others springing up e.g. Denmark & Romania

•Nation state based due to tax-driven natureoUniformity vs tax saving & complexity oStability vs politics

Tax Qualified Plans: France• Reduced tax benefits under free share ‘Macron’ regime• Changes apply to any share plan launched after 31 December 2016• Changes increase the employer social security contribution and reduce the tax benefit for employeeso Employer social security rate increased from 20% to 30%o For employees, amounts over EUR300,000 will now be taxed as

salary

Tax Qualified Plans: Ireland• Share based remuneration for small and medium sized enterprises (SMEs) announced • Part of on-going commitment to encourage employee financial participation• Due in 2018 Budget• Current tax advantaged share plans – substantial tax savings for employers and employeeso SAYEo APSS

Data Protection

• Issue first started in Germanyo Initially to give privacy and protect the

individual from the state

• It has now gone global and changedo Now the state holds data for security reasons o EU is now a major player

•Modern day justification is to protect privacy and prevent exploitationo Commercial companies can mine data to their advantage

Data Protection: Colombia• Colombian data controllers required to register databases online, commenced 9 November 2016• From 2018:

o annual updates o report any substantial changes to the registered information o report any breach in security or misuse of the informationo file claims made by data subjects

• Databases created after 8 November 2016 must be registered within two months of creation

Administrators / Nominees• Hub for services• Global share holding• Companies need to:

o Enforce holding periods & clawbacko Increase efficiency and ease of access

• Issues? o Data flowo Consent to termso Licensing

Clawback• Started with just financial services companies -now all industries?• Germany:

o New obligation on banks to include clawback provisions for senior staff for “severe misconduct”

o Two-year clawback period post-release of restrictionso May extend beyond financial serviceso Expected to be published in Q2 2017

New EU Regulations

EU

Market Abuse Regulation

EU Prospectus Regulation

Data Protection Regulation

EU Prospectus Regulation• Replaces existing EU Prospectus Directive• Main change

o Expands employee share plan exemption to all issuers (not just EU)

• Other exemptions remain with changeso Fewer than 150 personso Value below EUR 1million within EU over 12 monthso Value between EUR 1 million & 8 million

• Timing – 2017 / 2019

EU Market Abuse Regulation (MAR)

Market Abuse

Directive

a) Prohibits PDMRdealings in “closed

periods”b) Insider dealing

offencec) Notification

obligations

Can apply to many steps in

equity plan process – think

carefully!

Applied from 3 July

2016

Replaces New Regime Issues Timing

EU Data Protection Regulation

Data Protection Directive

Higher standard of consent required

Applies from 25 May 2018

Replaces Issues Timing

EU/US Privacy Shield

Safe Harbour arrangement

Still some uncertainty as to

effectiveness

US companies able to register from 1 August

2016

Replaces TimingIssues

HSBC’s Approach• 70 countries• 3 global plans• 3-year rolling due diligence process• Combination of:

o Specific legal reports ‘signed off’ by local counselo Database information

• Overview report• Ongoing spreadsheet of decisions & actions

Brambles’ Approach

• 40 countries• 2 global plans• Rolling due diligence process•Mainly database review• Looks at 10-15 countries each year• International Supplement reviewed annually

Audience Thoughts On…

•Challenges?

•Approaches?

•Best practice?

Key Reflections• Keep up to date with tax and regulatory changes• Keep use of tax-qualified plans under review • Check administration and nominee arrangements are still fit for purpose• Review data protection and clawback clauses, policies and procedures • You may not need to file an EU prospectus from 2019• Aim for global consistency and enforceability – not national differences• Make sure you have a robust due diligence process!

Questions?

Thank YouKevin O’Hare

HSBCkevin.o'hare@hsbc.com

Joanna MakBrambles

joanna.mak@brambles.com

Bob GraysonTapestry Compliance

bob.grayson@tapestrycompliance.com

Sally BlanchflowerTapestry Compliance

sally.blanchflower@tapestrycompliance.com

Thank You Thank you for attending GEO’s 18thAnnual Conference in Rome. We hope you enjoyed this session. • If you require CPE Credit, don’t

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