BELGIUM:EXTENDING THE TERM OF UNDER WATER STOCK OPTIONS - 23 July 2009

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ADMINISTRATIVE CIRCULAR ISSUED ON STOCK OPTION PLAN EXTENSION
– EXTENDING THE TERM OF UNDER WATER STOCK OPTIONS

To Benefit From This Extension, Action is Required by July 31,
2009

NOTE: This communication is an update to the Belgian Global
Rewards Update which was issued in May, 2009.

Background

The Belgian tax authorities recently issued an administrative
circular which clarified that subject to certain conditions, companies are
able to extend the exercise period for stock options offered between November
2, 2002 and August 31, 2008, without negative Belgian tax consequences.

If stock options are accepted in writing within 60 days of the
date of offer, Belgium will tax stock options on the date of grant, which is
presumed to be 60 days after the date at which the options are offered. The
taxable benefit is calculated as a percentage of the underlying shares’
value at the time of the offer.

For stock options granted on or after January 10, 2003 which
are not accepted in writing within 60 days of the date of offer, taxation
will arise at the date of exercise, on the difference between the fair market
value of the shares at the date of exercise, less the exercise price paid by
the employee.

Extending the Term of Under Water Stock Options

Market conditions have placed many outstanding options
underwater. As a result, employees may choose not to exercise their options,
and taxes that have been paid up front (e.g., options which were subject to
tax at grant) cannot be recovered. To address this situation, the Economic
Recovery Law (published in the April 7, 2009 Belgian Official Journal) allows
companies to extend a stock option’s exercise period by a maximum of
five years, without tax consequences, if conditions outlined in the
administrative circular are met.

Stock options must meet the following requirements to benefit
from this extension:

·         
It must still be possible
to exercise the options; meaning that the option term has not expired.

·         
The options must have been
offered between November 2, 2002 and August 31, 2008.

o    No extension is possible for options that benefited from an
extension under a similar 2002 Program Law.

·         
The options must have a
total fiscal value that does not exceed EUR 100,000 (approximately

U.S.
$140,000).

o    According to Belgian tax law, the fiscal value is defined as
the in-kind value of the benefit, and is calculated for each taxpayer and
each company. 

o    As a result, it is possible for a taxpayer to benefit from the
stock options extension at a value exceeding EUR 100,000, when the options
are granted by different companies.

·         
Participants who have stock
options for which an extension is granted by the company must give written
consent accepting the extension. Refusal by some employees does not preclude
others from giving their consent and benefiting from the extension.

·         
The company is required to
retain all beneficiary consent documents.

·         
The Tax administration must
be notified regarding extension agreements before July 31, 2009. This
notification must contain:

o    A description of the underlying shares, exercise price and
period, and any important conditions attached to the options.

o    The identity and location of the participating employees.

ACTION

Companies should:

·         
Review outstanding stock
option awards to determine whether extension relief is available.

·         
Ensure that the Tax
administration is notified before July 31, 2009 in instances where the
decision is made to extend the stock options.

People to Contact

For assistance in this
matter or any other issue related to the operation of your global rewards
plans, please contact your local Deloitte global rewards consulting services
advisor or email us at: globalequity@deloitte.com and a global rewards consultant will contact you.

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