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employee share schemes – new IRD reporting requirements

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As part of this year’s changes to the tax treatment of employee share purchase schemes, the IRD has introduced new obligations on employers to report benefits received by employees under share schemes.

Employers are now required (since 1 April 2017) to report when an employee acquires shares under a share purchase agreement, as part of their employer monthly schedule (EMS) filing.  To do this, employers must identify the benefit the employee receives when acquiring the shares (which is the basis for their tax liability), which is determined by calculating the difference between:

  • for shares, the price paid for the shares vs the market value of those shares at that time; or
  • for options, the exercise price of the option vs the market value of the underlying shares at the time the option is exercised.

These reporting obligations will also apply to conditional share purchase schemes that will be taxed on a similar basis to options once the IRD’s Bill on the taxation of employee share schemes comes into force.

You can find a description of the new reporting scheme on the IRD’s website.  If you have an employee share purchase or share option scheme in place, we suggest you check out the information provided by the IRD then schedule a chat with your regular tax adviser to work out the most efficient way to comply with these new obligations.

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