Proposed changes to Conditional and Option-like Employee Share Schemes

In 2016 the Government announced proposals in respect of the taxation of employee share schemes in New Zealand. The proposals are being introduced to align the tax treatment of employee share scheme incentives with cash-bonus payments. The proposed changes will alter the timing of when tax arises and the amount of tax payable.

Currently employees are taxed when shares are first acquired. If gains are made subsequent to acquisition date and the time at which all conditions are satisfied or options are exercised, such gains may not be subject to income tax. The new proposals will result in shares being taxed when there are no longer any conditions attached to the shares. Employees would be taxed on the difference between the market value of the shares when there are no conditions attached and the amount paid for the shares. A transitional period of up three years may apply to the proposed new rules if enacted.

Submissions on the proposals can be made to Inland Revenue by 22 June 2016. Speak to your BDO adviser for more information.