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UK: Automatic Enrollment into Pension Schemes Required Starting October 2012

Starting in October 2012, the UK Pensions Act requires employers in the UK to automatically enroll certain eligible employees who are not otherwise in a workplace pension scheme into a workplace pension scheme by a specified date. The automatic enrollment requirement will be implemented in phases, with the requirement applying first to large employers (in late 2012 and early 2013) and then to medium and small employers in phases between 2013 and 2016. Eligible employees include employees who work or ordinarily work in the UK (under their contract) who are between age 22 and state pension age who earn above a current minimum annual salary of ?ú7,475. Those employees will be required to be automatically enrolled into a pension plan and receive contributions from their employer. More information on this new requirement is available here.

UK: Output VAT Due on Salary Sacrifice Schemes Beginning January 1, 2012

Effective January 1, 2012, when an employee in the United Kingdom opts to forgo salary to receive goods or services from his or her employer (a ?Ç£salary sacrifice scheme?Ç¥), the employer must account for output on value-added tax (VAT) on these goods and services if the arrangement constitutes a salary sacrifice scheme for VAT purposes. Prior to this change, HM Revenue & Customs had accepted that the reduction in salary under a salary sacrifice scheme did not constitute consideration for the benefits received and output tax was not due. This change is explained in Revenue & Customs Brief 28/11, which is available?áhere.

U.K. ?Ç£Disguised Remuneration?Ç¥ Legislation in Effect

Finance Act 2011 includes legislation designed to tax ?Ç£disguised remuneration?Ç¥ effective for the 2011-2012 tax year. The legislation targets tax avoidance arrangements in the form of (1) arrangements that involve third parties (including trusts or other vehicles used to reward employees) and seek to avoid or defer the payment of income tax and (2) unregistered pension schemes. While there are a number of detailed exclusions, if the legislation applies, it deems an amount to be subject to taxation as employment income even if the employee has not yet actually received such income and may never receive such income. Draft guidance can be found here.

Say-on-Pay and Limits on Key Management Compensation Down Under

Similar to the Dodd-Frank Act in the United States, Australia recently adopted legislation applicable to listed companies that, among other reforms, provides for shareholder voting on executive compensation and prohibits compensation arrangements (?Ç£hedging arrangements?Ç¥) that limit the risk exposure for a member of key management for compensation that depends on the satisfaction of a performance condition. The new shareholder vote rules in Australia go further than the ?Ç£say-on-pay?Ç¥ rules in the U.S., by providing that if more than 25 percent of stockholders vote against a listed company?ÇÖs remuneration report in two consecutive years, stockholders can then require the company?ÇÖs board of directors to stand for reelection. Key management is excluded from voting on the remuneration reports. The new shareholder vote rule applies to remuneration report resolutions put to shareholders after July 1, 2011. The prohibition on hedging arrangements applies to agreements entered into on or after July 1, 2011.

FBAR Filing Deadline Extended Again

The Internal Revenue Service has again extended the deadline for certain persons to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), for 2009 and prior calendar years. The filing deadline has been extended to November 1, 2011, from June 30, 2011. The extension applies to persons with signature authority over a foreign financial account, but no financial interest in the account.?á Later deadlines may apply under certain circumstances.?á A copy of the notice is here.

Ireland – Changes to Treatment of Share-Based Compensation

Ireland recently modified its tax rules applicable to share-based remuneration, in particular, including gains on certain share-based compensation for income tax (PAYE), universal social charge (USC), and social security (PRSI) purposes. The new rules are still being clarified, but are generally effective as of January 1, 2011 (certain grandfathering rules apply). Employers with employees in Ireland should consider how these changes will affect their compensation strategies as well as their reporting and withholding obligations. Employers have until July 2011 to settle outstanding liabilities for 2011 without interest or penalty. Recent Irish Revenue guidance on the changes can be found here.

Final Rules for FBAR Filings

The Department of the Treasury recently issued final regulations on Reporting on Foreign Financial Accounts (FBAR) filing requirements under the Bank Secrecy Act. These requirements apply to, among others, U.S. pension trusts that invest in foreign financial accounts or persons with signature authority over such accounts. The regulations do not provide a broad exemption from the filing requirement for pension trusts, as commenters on the proposed rules had requested. But, they do provide some relief. For example, a pension trust that invests in foreign financial accounts through a collective or group trust maintained by a U.S. bank custodian will not have to file FBAR reports with respect to those assets provided the pension trust has no legal right in the assets and can only access them through the U.S. custodian bank. The final regulations are effective March 28, 2011 and apply to filings due by June 30, 2011 with respect… Continue Reading

Changes to Polish Income Tax Treatment of Employee Equity Awards

The Polish government recently adopted an amendment to Article 24.11 the Polish Personal Income Tax Law (PPIT) which, effective January 1, 2011, restricts the ability to defer tax on the awards.?á Article 24.11 of the PPIT provides an exemption for employees to defer the taxation of their equity based awards until the sale of the underlying shares so long as: (i) the shares which were delivered at vesting or exercise were newly issued shares, and (ii) the equity awards were approved by a resolution of the shareholders of the granting company.?á Effective January 1, 2011, the amendment broadens Article 24.11 by expanding the types of shares eligible for the exemption to existing shares (in addition to newly issued shares), but narrows the exemption by limiting the types of shares to those issued by an entity headquartered in the European Union or the European Economic Area.?á U.S. companies with equity based… Continue Reading

IRS Announces Changes to Rules for Income Tax Withholding for Nonresident Aliens Performing Services in the United States

The Internal Revenue Service recently announced that the withholding tables for wages paid on or after January 1, 2011 will not reflect the Making Work Pay Credit, and that Notice 2009-91 will not apply in determining the withholding on nonresident aliens.?á According to IRS Notice 2011-12, employers must determine income tax withholdings for nonresident aliens performing services within the United States using the procedure explained in Notice 2005-76, together with the tables in the revisions of Publication 15 (Circular E), Employer?ÇÖs Tax Guide, and Notice 1036, Early Release Copies of the 2011 Percentage Method Tables for Income Tax Withholding that are in effect when the wages are paid.?á Employers should implement the new withholding tables as soon as possible, but not later than January 31, 2011.

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