U.S. Equity Compensation Grants to Foreign Employees: Structuring and Reporting Options

As U.S. companies continue to expand globally, they are increasingly offering equity-based compensation to employees located outside the United States. Grants of options or other equity-based compensation can create multiple cross-border issues for both the U.S. firm and the foreign employee.

For employees of foreign subsidiaries, equity compensation from the U.S. parent creates still more complexities. Parent grants to foreign employees are often “pushed down” to the subsidiary, which enters into a “recharge” agreement with the parent. Depending on the structuring of the recharge agreement, the grant can create both tax and transfer pricing implications for the U.S. parent.

Listen as our experienced panel provides a thorough and practical guide to the tax treatment of equity compensation grants to foreign employees by U.S. companies.

1. Treatment of non-qualified stock option grants from U.S. company to non-U.S. employee
   1. Sourcing of income
   2. Timing of U.S. and foreign company tax
   3. Foreign tax credit
   4. Impact of tax treaties
2. Grant of equity shares of U.S. parent company to employees of foreign subsidiary
3. Recharging agreements
4. Transfer pricing implications

The panel will discuss these and other important issues:

• U.S. income sourcing methods for non-qualified options granted to non-U.S. employees
• Withholding requirements on U.S. companies on U.S.-sourced equity grants to non-U.S. employees
• What is a “recharging agreement” and how does it work in the context of U.S. parent company grants of equity compensation to employees of foreign subsidiaries?
• Tax impact of recharging on parent company
• Restricted stock units and other forms of equity compensation
• Tax qualified plans on a global basis
• Legal and regulatory issues in relation to global grants - including securities laws; exchange controls and data protection
• Global remuneration regulations affecting equity plans
• Documentation for global plans and how to avoid too many versions

Learning Objectives

After completing this course, you will be able to:

• Identify the tax treatment of a U.S. company granting non-qualified stock options to foreign employees
• Recognize the potential for dual taxation on grants of non-qualified stock options to foreign persons
• Determine the tax and transfer pricing ramifications of recharging agreements in the grant of equity shares of the U.S. parent to employees of a foreign subsidiary

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules, supervising other preparers/accountants. Specific knowledge and understanding of qualified and non-qualified stock option structuring and tax treatment; familiarity with foreign information reporting and tax withholding requirements; familiarity with transfer pricing principles.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).