Our Client

Project ESOP is a company with operations based in China, planning to be publicly listed. It current has an employee share option plan (“ESOP”), and the employees are able to exercise their share options after the company is listed. 

The Challenge

Employees who exercise their options are expected to have a substantial amount of capital gain at exercise date, which is taxable by tax authorities at a individual tax rate of 20-45%.

Thus companies will normally plan for the employees to realise a portion of the gain through transferring the share options into a Trust, where the Trust will be subject to a lower corporate tax rate of 20%.

Our Solution

• Review the current employee share option plan, vesting schedule and details of your employees’ tax resident status
• Formulate a plan to transfer the ESOPs to a Trust
• Calculate the tax impact and tax savings from the arrangement
• Manage the transfer process, including arrangements with the Trust service provider in drafting documents required to be signed by the company and its employees
• Discuss with your lawyers the post-listing plan in updating all ESOP documents with the company and its employees, and the exercising period and terms
• Put all employee ESOP data into an online brokerage account for ease of management and trading, and arrange training to your staff.

Result

Project ESOP successfully restructured its ESOPs into a Trust and saved tax for its staff.