You can provide exempt benefits to your employees in the form of an exempt ESS if you meet the eligibility criteria.
An exempt ESS is a widely offered scheme that meets certain criteria. Benefits under an exempt scheme are not taxable.
No deductions are available in relation to an exempt scheme other than in respect of establishing or managing the exempt scheme.
The eligibility criteria include:
- the cost to employees of the shares available to buy must not be more than their market value at the date of purchase
- the maximum value of shares provided to an employee under an exempt scheme is $5,000 a year
- the maximum discount an employer can provide to an employee is $2,000 a year
- 90% or more of full-time permanent employees must be eligible to take part in the scheme. If the scheme applies to part-time employees or to seasonal employees, the same threshold applies to those workers
- if the scheme has a minimum spend requirement, the amount can be no more than $1,000 a year for each employee
- any minimum period of service which may be required before an employee becomes eligible to take part must not exceed 3 years
- if the employee is required to pay any amount for the shares, then the employer must provide an interest free loan for that amount or let the employee pay for the shares in instalments.
An exempt scheme does not require our approval. However, you must notify us that the scheme exists and advise us of shares granted and contributions received under the scheme every year.
Generally speaking, the shares must be held (either by the employee or by a trustee of a trust on behalf of the employee) for the longer of 3 years and when the loan is repaid.
Reporting requirements
If you operate an exempt scheme you need to:
- tell us you are operating the scheme, using the Notification of exempt employee share scheme - IR1211 form
- report at the end of the tax year on the total value of the shares granted to your employees using the exempt employee share scheme - grant of shares information - IR1212 form.
Do not include exempt schemes in your regular employment information filing.