Global Rewards Update Sandy Shurin Deloitte Tax LLP

Agenda Ø Country updates • • Hungary: Sourcing rule for equity compensation Ireland: Cross-border taxation of RSUs Philippines: Tax treatment of stock option plans Russia: Clarification on stock option taxation rule © 2013 Deloitte LLP. Private and confidential.

Country Updates © 2013 Deloitte LLP. Private and confidential.

Hungary: New Interpretation on the Sourcing Rules for Equity Compensation • Background: The Hungarian Ministry for National Economy has issued a non-binding guideline changing the interpretation of the authorities for the sourcing rules for equity compensation. Previously, stock option income was based on the period of presence in Hungary between grant to exercise. • OECD sourcing confirmation: The recent guideline confirms the OECD position that equity compensation attributed to Hungary work days during the grant-to-vest period should be taxable in Hungary. Note: The guideline does not specify which tax year the new souring rule can be applied. • Action steps: • Consider employee communications, so that employees may consider amending personal tax returns filed for previous years (2007 or later), as there may be cases where reassessment of tax could result in significant tax savings (i. e. for employees who arrive in Hungary after vesting but before exercise). 4 © 2013 Deloitte LLP. Private and confidential.

Ireland: Restricted Stock Units (RSUs) – Cross Border Taxation • Background: Irish Revenue issued official guidance at the end of 2012 on how RSUs should be treated for Irish tax purposes in cross-border situations. • Key considerations: • 100% if resident in Ireland at taxable event; and • Not taxable if non-resident at taxable event. • Double tax relief will be allowed when employees file resident returns at yearend. • Conditions for the “real-time” foreign tax credit: To apply the foreign tax credit mechanism through payroll, the conditions are as follows: ‾ Ireland has a tax treaty with the country where there is tax withholding due ‾ Employee’s annual personal income tax return must be filed by March 31 st of following year; ‾ The employer must provide information reporting to Revenue by March 31 st of the following tax year; and ‾ Evidence of deduction of foreign income tax at source (which must be nonrefundable) must be available for production if requested by the Revenue. Note: Where the conditions are not met, Revenue will make an estimate of the full amounts due and the standard interest and penalty provisions will apply. 5 © 2013 Deloitte LLP. Private and confidential.

Ireland: Restricted Stock Units (RSUs) – Cross Border Taxation • Action steps: • Employers should consider whether to administer the “real-time” foreign tax credit relief at the payroll withholding/reporting stage for Ireland inbound employees. • Setup an internal process to apply the relief and work with payroll provider to ensure adjustments are properly reported through payroll. 6 © 2013 Deloitte LLP. Private and confidential.

Philippines: Tax Treatment of Stock Option Plans • Background: In recent years, the Bureau of Internal Revenue (BIR) has held different opinions on the taxability gains or income derived from the exercise of stock options granted to employees. However, The BIR recently issued Circular No. 88 -2012 clarifying the tax treatment of the income or gain derived by employees from the exercise of stock options. • Changes: 7 ‾ General Treatment: • Employee recognize taxable income on the spread at exercise. • No withholding/reporting, provided there is no recharge of the costs of the options. ‾ Fringe Benefit Tax: If the following conditions are met, stock options will be subject to fringe benefit tax (an employer tax cost) at the time of exercise: • Stock options are only granted to managerial and supervisory employees; and • Costs related to the options are booked in the books of the local entity or recharged to the local entity. Note: Where fringe benefit tax applies, the employee does not have an income tax obligation at exercise. © 2013 Deloitte LLP. Private and confidential.

Philippines: Tax treatment of Stock Option Plans • Action Steps: Companies with non-broad based stock option plans should review their existing recharge policies, and consider the effect of the additional employer cost (fringe benefit tax). 8 © 2013 Deloitte LLP. Private and confidential.

Russia: Clarifications on Stock Option Taxation • Background: Effective December 21, 2010, amendments adopted to the Russian Tax Code suggested that stock options could be treated as a non-traded financial instrument which could be taxed on date of grant. • Further Clarifications: • On December 19, 2012, the Ministry of Finance issued an official clarification addressed to a particular taxpayer stating that the stock options provided under the long-term incentive plan in question should not be taxed at grant (i. e. , taxation occurs at the time of exercise). • The plan covered under this clarification has some key performance conditions, limitations on number of shares to be issue under the plan, vesting and exercise period conditions. The options were non-transferable and the company was given a high level of discretion in relation to participants selection. • Action steps: Although this clarification is not general binding, it serves as a good precedent for taxing plain vanilla stock options at the time of exercise. 9 © 2013 Deloitte LLP. Private and confidential.

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