萬國法律事務所

Taiwan’s Ministry of Finance has issued instructions regarding the time for filing taxes with respect to restricted shares newly issued by public companies this year to employees and the method of recording the same in the account books.

Restricted shares for employees are used to reward employees. These shares are usually issued on conditions such as employees staying on with the employer for a certain period of time or achieving certain work results. Until such conditions are met, a company will hold the restricted shares for employees until the employee’s term of employment expires or the targeted results of work are achieved. If the conditions are not met, the company is entitled to withdraw the restricted shares.

A public company that issues restricted shares for employees must calculate the value of the shares on the date that the shares are issued to employees and amortize as expense within the “vested period”, and may list the expense as a deduction when filing its profit-seeking enterprise income tax.

The vested period is the time before the condition is met. During the vested period, the employee’s right to the restricted shares is limited. If the condition is not met, the company must redeem the issued shares and record the same as salary expense in the account books. If an employee leaves the employment during the vested period, the company does not need to amend the record to indicate it as annual revenue, but only has to adjust the year in which the vested period expires to reflect the correct salary expense.

Employees obtaining shares with restrictions on the right of transfer will obtain ownership of the shares after the condition is met. The condition-met day is the day on which the employees may begin to transact the shares. Employees who transact the shares must report the balance between the transaction and the subscription prices as the consolidated income tax as “other incomes”.