Global Employer Services | 6 June 2016
Global reward update
New Zealand – Proposal to introduce
employer reporting and voluntary
withholding on employee share plan
benefits
Background
Under current legislation in New Zealand, there are no employer reporting or withholding
obligations in relation to employee share plans. Participants are required to report share
benefits and pay any tax arising through their annual tax return. However, all other taxes
due in respect of an individual’s employment income are collected through the Pay As You
Earn (“PAYE”) withholding regime.
New Zealand’s Government is currently considering changing these rules by introducing
employer reporting requirements and the option for employers to operate voluntary
withholding. It is proposed that the new rules will take effect from 1 April 2017.
Proposed changes
Voluntary withholding
A recent Bill, the Taxation (Transformation: First Phase Simplification and Other Measures)
Bill (“the Bill”), proposes to introduce the option for employers to voluntarily operate tax
withholding on share benefits received by employees. Withholding would apply at the tax
point (e.g. at vesting for conditional share awards and exercise for stock options).
The Bill indicates that an employer’s election to operate withholding can be withdrawn at any
time and can also be made on an employee-by-employee basis.
Reporting requirements
The Bill also proposes to introduce mandatory reporting requirements for employers.
Employers will be required to disclose the taxable value of share benefits received by
employees in their Employer Monthly Schedule, regardless of whether withholding is
operated.
The following would be excluded from the proposed reporting requirements:
 Share benefits delivered under an employee share plan specifically approved by the
Commissioner of Inland Revenue;
 Share benefits delivered to former employees (this includes terminated employees and
mobile employees who are not in New Zealand at the tax point); and
 The sale of an award by an employee or associated person to a non-associated third
party prior to vesting.
Employers will be required to report any relevant amounts to the Inland Revenue through
their PAYE return in the month following the month in which the taxable event occurred.
Impact
The proposed reforms will reduce compliance for employees, but increase disclosure
requirements for employers. This will result in a greater flow of information to the Inland
Revenue and increase transparency of employee share plans.
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Deloitte’s view
Historically, some employers had operated tax withholding on employee share benefits in
New Zealand. However, the Inland Revenue had previously clarified that this position was
incorrect. The new proposal shows a shift away from that previous position.
The current consensus in the market on the new proposal is that operating tax withholding
may not be worthwhile. Therefore, it is possible that many companies will continue with their
current position of not operating withholding on share benefits.
The requirement to report taxable benefits is likely to increase compliance costs for
employers. This may require systems development and additional compliance work,
especially if an employer chooses not to operate withholding.
Contacts
For assistance with these issues, or any other issue related to the operation of your global equity plans, please contact
your usual Deloitte adviser or email us at [email protected], and an adviser will contact you.
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