Second consultation on taxation of employee share scheme

05 SEPTEMBER 2016

Second consultation round on taxation of employee share schemes

Inland Revenue has released an update on proposals to reform the tax treatment of employee share schemes.
Submissions close on 30 September.

Key shifts

The changes since the May consultation paper are:

• retention of the existing exemption for widely offered share schemes (section DC 12 schemes) but with a number of amendments that are mostly intended to make the current rules more workable - the core features of this exemption are unchanged from 1980. However, the deemed tax deduction now available for employees would be removed

• the idea of designing special rules for start-up companies has been dropped through lack of support from submitters, and

• transitional relief will be extended to apply permanently in some cases for schemes in existence before 12 May 2016. Longer transitional periods will apply in other cases.

Our earlier Brief Counsel also referred to changes to the Financial Markets Conduct Act (FMCA) to make it more cost effective to offer staff shares, and to NZX proposals.

The FMCA exemption has now been legislated for, and NZX remuneration proposals have been confirmed (see Chapman Tripp commentary and NZX review).

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