Employers in Switzerland are required to provide details on
employee equity incentive holdings in a statement included with
the annual Swiss salary certificate.
These statements are known as 'equity annexes', and all
companies awarding equity incentives to Swiss-based (resident
or non-resident) employees must comply with this requirement.
Equity annexes are not new, but the cantonal tax authorities
throughout the country are becoming stricter when ensuring that
equity incentive reporting is accurate. Failure to comply can
be costly for employers, both from a reputational and a
financial perspective.
Employee equity incentive reporting for internationally
mobile employees can be challenging even for the best run
payroll departments. Employers should be aware of the
following.
Misreporting
Common equity incentive reporting mistakes include:
- Failure to prepare annexes when no
transaction has taken place;
- Failure to include all required
information in the reporting document; and
- Reporting only the Swiss taxable portion
of income in the salary certificate (the authorities require
full reporting).
These mistakes can have an impact on the calculation of an
employee's income tax liability.
Consequences of failure to comply
The requirement to prepare equity annexes has been in
existence for five years as of January 2018. Certain tax
authorities previously tolerated non-filers as long as equity
income was reported in the salary certificate; however, this
practice has shifted over the years and employers that fail to
file correct annexes now face stiff penalties.
When inaccurate annexes are discovered for the tax period in
progress, the Swiss tax authorities often also will audit prior
years' reporting to check for similar mistakes. Switzerland's
10-year statute of limitations can make this exercise
challenging for plan administrators and payroll
departments.
Other business benefits
Aside from the compliance requirements, proper reporting of
employee equity incentives has business benefits, such as:
- It is an easy way to verify total equity
income, which is helpful in cases of multiple exercises and
vestings;
- It clearly shows the allocation of foreign
and Swiss-sourced equity income for purposes of reporting
income in the salary certificate;
- It provides a helpful overview for
employees by showing the different sources of employment
income for the relevant year, the income they can expect to
realise in the following years and the vesting dates of the
shares in their employee portfolio;
- It enables employees to accurately report
their equity income on the tax return; and
- It provides useful information for human
resources and global mobility teams with Swiss-based
employees.
Comments
Employers should invest time in reviewing the requirements
for employee equity incentive reporting. Once the obligations
are well-understood, the process can be automated and
administered by payroll generalists.
|
|
Renaat
van den Eeckhaut |
Anna
Schneider |
Renaat van den Eeckhaut (rhvandeneeckhaut@deloitte.ch)
and Anna Schneider (annasschneider@deloitte.ch)
Deloitte
Tel: +41 58 279 6986 and +41 58 279 6112
Website: www.deloitte.ch