English to Spanish Bus/Financial Finance (general) TAXATION

THIS IS "DUTCH ENGLISH," AND I AM TRANSLATING QUESTIONS AND ANSWERS REGARDING A PERFORMANCE SHARE PLAN FOR EXPATRIATE EMPLOYEES.

Q: I have paid taxes in more than one country but I don’t think they have been apportioned correctly. Please explain.

A: Taxes on equity may be “sourced” to reflect the time spent in a country from award to vest or award to distribution and this will vary from one country to another depending on their tax legislation/ tax treaties etc.

Example:
Period from award to distribution: 3 years
Period spent in Country X: 2 years
Period spent in Country Y: 1 year

In Country Y at distribution.

Country X sources gain from award to distribution i.e. on time spent in Country X during the vesting period as a % of the vesting period (so in this example 2 years out of 3 – 66.6%)

Country Y does not apply sourcing so taxes the whole gain (100%) from award to distribution.

Country X tax rate is 30%
Country Y tax rate is 40%

So, if the gross award is €10,000

Country X will tax €10,000 * 66.6% * Country X tax rate (30%) = €1,998
Country Y will tax €10,000 * 100% * Country Y tax rate (40%) = €4,000

Total taxes withheld = €5,998 (amounting to 59.98% of the award) Country Y may provide relief via the personal tax return.

NOTE: I COPIED AND PASTED THE ABOVE. THE QUOTATION MARKS ("SOURCED") ARE NOT MINE.