IRAS issues an updated e-Tax Guide, ‘Equity Remuneration Incentive Scheme (ERIS)(Second Edition)’

On By taxsgIn Corporate Tax, Latest Tax News

7 May 2013

On 26 April 2013, the Inland Revenue Authority of Singapore (IRAS) updated the e-Tax Guide, ‘Equity Remuneration Incentive Scheme (ERIS)(Second Edition)’.

This e-Tax Guide provides details on the tax exemption of gains derived by an employee from Employee Share Options (ESOP) and Employee Share Ownership (ESOW) plans granted by the employer.

The ERIS provides certain tax exemption on gains derived from the ESOP and ESOW plans. It consists of the following three sub-schemes.

  • Equity Remuneration Incentive Scheme (Start-Ups) [ERIS (Start-Ups)]
  • Equity Remuneration Incentive Scheme (SMEs) [ERIS (SMEs)]
  • Equity Remuneration Incentive Scheme (All Corporations) [ERIS (All Corporations)].

ERIS (Start-Ups) applies to employees of a new start-up company incorporated in Singapore. Employees may enjoy exemption of 75% of the ESOP/ESOW gains. This is subject to meeting other qualifying conditions.

ERIS (SMEs) applies to employees of a Singapore-incorporated company whose aggregated market value of gross assets does not exceed $100 million. Employees may enjoy exemption of 50% of the ESOP/ESOW gains. This is subject to meeting other qualifying conditions.

ERIS (All Corporations) applies to employees of a company incorporated in Singapore, or a branch of a foreign-incorporated company registered in Singapore. Employees may enjoy full exemption on the first $2,000 of ESOP/ESOW gains, plus exemption of 25% of the remaining gains. This is subject to meeting other qualifying conditions.

In 2013, the Singapore Government announced that ERIS would be phased out as a move to rationalise the tax treatment of remuneration, regardless of form, for employees.

In this edition, amendments include:

  • Insertion of new paragraphs relating to definition of ‘qualifying period’ updated (paragraph 3.6), the phasing out of ERIS (paragraph 4.6), an illustration on the qualifying period of grant and gains to be derived from stock options or shares under ERIS following the changes announced in the Budget 2013 (paragraph 6.3 and Annex D3).
  • Revisions made to paragraphs on tax incentives of the three ERIS sub-schemes (paragraph 5.1), qualifying period (paragraph 6), phasing out of ERIS (paragraph 6.1), qualifying employee (7.13 ), examples on the application of the various income tax exemptions under the three schemes (Annex E1, E2, E3) and specimen letters (Annexes F1,F2 and F3).
  • Insertions of footnotes at paragraphs 5.1 ‘The tax incentives of the three ERIS sub-schemes’, qualifying period (paragraph 6.1) and to Annex 3 (Example to illustrate on the qualifying period of grant and gains to be derived from stock options or shares under ERIS).

More details can be found in the IRAS’s e-Tax Guide.

Source: This article was extracted from the Inland Revenue Authority of Singapore (IRAS) website.