China

For equity plans registered with China’s State Administration of Foreign Exchange (China SAFE), companies were previously required to submit quarterly activity reports. Effective Q3 of 2025, this requirement has been eliminated.

Next steps: This has been a welcome change for most companies. While the quarterly report was a fairly straightforward activity report, the submission required reconciling data with payroll and amounts transferred through the local China bank account. Please note that material plan changes (e.g., amendments to material plan terms, termination/deregistration, bank changes) should continue to be reported to China SAFE.

China

Previously, China SAFE imposed a policy that required terminated employees to sell all shares and remit the proceeds through the China SAFE account within six months of termination (the “six-month forced sale rule”). SAFE confirmed that this six-month forced sale rule has been removed and that a former employee may now keep his/her shares for an unlimited period of time.

Next steps: The six-month sale/repatriation requirement was universally disliked by employees because it limited their ability to retain options and shares for longer than six months post-termination. Interestingly, most companies haven’t altered their practice to allow terminated employees to hold equity awards and shares beyond the six-month period despite the SAFE policy change. The rationale stems from their inability to process payments that could occur years after termination due to the length of time payroll data is retained.

European Union

Under the Pay Transparency Directive, the gender pay gap must not exceed 5% (Directive (EU) 2023/970). Reports must reflect data beginning in calendar year 2026, including but not limited to (a) average gender pay gap, (b) median gender pay gap, (c) proportion of female/male workers in each quartile pay band, and (d) average gender pay gap across categories of workers. Additional disclosure requirements regarding pay range and pay progression also apply. Member states must implement the directive by June 7, 2026, and may establish state-specific obligations. A reporting requirement also applies. The reporting interval varies based on employer size. For example, companies with at least 250 workers must report annually beginning in June 2027.

Next steps: Companies should evaluate whether current pay transparency practices for entities in the European Union can be expanded to comply with the Pay Transparency Directive. Alternatively, they should consider whether pay transparency practices for entities outside of the European Union can be implemented for entities in the European Union. Our teams are available to evaluate initial compliance and develop an appropriate strategy.

Japan

Companies offering stock options or stock purchase rights to 50 or more offerees in Japan with a value exceeding ¥100 million were required to file a securities registration report (SRS). A limited exemption from the filing requirement was available for an offer of stock options or stock purchase rights to the employees of an (a) wholly owned and (b) first-tier or second-tier subsidiary of the issuing company.

Following a 2025 amendment to the securities law, the exemption is now available if the offer is made to employees of a Japanese subsidiary of the issuing company. The requirements for the subsidiary Japanese subsidiary to be an (a) wholly owned or (b) first-tier or second-tier subsidiary have been removed.

Next steps: The change significantly reduces the compliance obligations for companies offering stock options or purchase rights to employees in Japan. Most companies were unable to use the previous exemption due to their corporate structure. Please note, however, that offers of ¥100 million or more continue to require the filing of an extraordinary report, however these submissions are much simpler (and similar to an 8-K filing in the United States).

Philippines

Effective September 16, 2025, the Philippines Securities and Exchange Commission (SEC) amended Section 10 of the Securities Regulation Code, including Section 10.2, which covers the application exemption confirmation of employee stock option plans (SEC Circular). The general requirements (and ancillary documentation) to obtain an exemption for equity plans remain the same under the new rules, although stricter requirements regarding cash equivalent payments now apply. These provisions require the company, through a secretary’s certificate, to confirm the awards will not be converted into a cash equivalent.

Next steps: The amendment doesn’t significantly impact the filing process or requirements to receive the exemption. Unfortunately, the process still requires ancillary documentation to be notarized and apostilled prior to submission, a component most companies find to be the most cumbersome aspect of the process.

United Kingdom

His Majesty’s Revenue & Customs (HMRC) clarified that sourcing rules should apply to international assignments and national insurance contributions. Under the clarification, companies should apportion national insurance with respect to all types of income (i.e., remuneration, bonuses, equity) based on the time spent in the United Kingdom. Under the clarification, national insurance contributions should be reviewed and adjusted for the six most recent tax years.

Next steps: Reviewing contributions for the prior six years will require coordination between finance, payroll, and equity teams, along with communication of any adjustments required with employees. Companies should consider whether an employee has a certificate of coverage under a social security totalization agreement, which may impact the country where social insurance/national insurance contributions are paid for the applicable period.

Trends

Income tax and social insurance rates

A number of countries have proposed income tax and social insurance rate and threshold changes for 2026. Similar to the last few years, during which most changes have increased the taxes due, many of these adjustments will increase the applicable tax rates, although there are a few exceptions this year.

Restrictive covenants

In 2025, various countries introduced legislation that curtailed restrictive covenants and limited their use solely to executive-level employees for short durations. We expect to see similar legislation in additional countries in 2026. The trend is based on a concern that these restrictions had become too common and were restricting the mobility of rank-and-file employees.

Looking ahead

Our team is available to assist with questions and considerations regarding changes in the new year. We also provide customized compliance calendars, based on the company’s current multinational presence and employee counts, to assist companies with tracking global equity and compensation plan filing and reporting deadlines.

For more information about this summary or customized compliance calendars, please contact a member of your McDermott Will & Schulte team or one of the authors listed below.