IRAS issues circulars on the Equity Remuneration Incentive Scheme

July/August 2008

During the 2008 Budget Speech, it was announced that the existing incentives for employee equity-based remuneration would be streamlined under the Equity Remuneration Incentive Scheme (ERIS), and a new ERIS (Start-Ups) would be introduced. Accordingly, in August 2008, the Inland Revenue Authority of Singapore (IRAS) issued a circular on the new ERIS (Start-ups) and revised the circulars on the existing schemes to reflect the 2008 Budget changes, which are highlighted below.

ERIS (Start-Ups)

ERIS (Start-Ups) is a new scheme introduced during the 2008 Budget Speech and the IRAS circular issued on 5 August 2008 provides details of the scheme. It is largely similar to ERIS (SMEs) (below) except that the employee can enjoy 75% tax exemption on the gains from stock option/shares instead of the 50% exemption granted under ERIS (SMEs). Further, the following additional qualifying conditions are imposed:

  • The stock options or share awards must be granted between 16 February 2008 and 15 February 2013.
  • The stock options or share awards must be granted within the first three years of the qualifying company's incorporation.
  • The qualifying company must not have more than 20 shareholders, and either all shareholders must be individuals, or at least one shareholder must be an individual who holds at least 10% of the total number of issued ordinary shares.

A company that chooses to avail itself of ERIS (Start-Ups) may not apply any of the other ERIS schemes for subsequent tranches unless it can no longer meet the qualifying conditions for ERIS (Start-Ups).

Although well-intentioned, it remains to be seen what the take-up for this scheme will be since start-up share option and share award schemes were largely a dot-com phenomena.

ERIS (All Corporations)

This scheme was previously known as the Company Employee Equity-based Remuneration Scheme (CEEBR) or the Company Stock Option Scheme (CSOP). During the 2008 Budget Speech, it was announced that:
  • the scheme would be renamed ERIS (All Corporations); and
  • the requirement that the scheme must be offered to at least 50% of the company's employees was relaxed to 25% for new tranches of stock options or share award plans granted from 16 February 2008.

On 1 August 2008, IRAS revised the circular which was first published on 31 March 2001, to incorporate the above changes.

ERIS (SMEs)

This scheme was previously known as the Entrepreneurial Employee Equity-based Remuneration Scheme (EEEBR) or the Entrepreneurial Employee Stock Option Scheme (Entrepreneurial ESOP). The revised circular dated 1 August 2008, which was first published on 22 May 2000, merely updates the name of the scheme.

For further details, please call your usual PricewaterhouseCoopers contact.