China currently supports participation by foreign employees in share incentive plans of domestically listed companies, with past restrictions gradually removed. The Measures for the Administration of Share Incentives of Listed Companies (2016) provides that foreign employees of domestic listed companies can have access to share incentive plans with certain limitations. Foreign employees who are eligible to participate in share incentive programs can open securities accounts for to receive shares from the incentive plan. In 2018, the newly-amended Administrative Rules of Share Incentives of Listed Companies expanded the scope of recipient eligibility from foreign employees based in China’s mainland to all foreign employees. At the same time, after CSRC’s amendments to the Measures for the Administration of Securities Registration and Settlement, “eligible foreign Analysis 4 Suggestions: Experts believe that share incentives of listed companies can help enhance employees' sense of belonging and encourage them to perform better, ease cash flow pressure, and enhance market confidence. But there is still room for improvement in the implementation. The following is suggestions by industry experts. First, enterprises should be allowed to declare the pre-tax deduction of enterprise income tax during the period in which share expenses are recorded in the accounts. When the share incentives are completed, the enterprise shall settle the tax according to the "difference between the market price and the exercise price at the time of the actual exercise". Any excess payment shall be refunded, and any deficiency repaid. Second, enterprises that cancel the implementation of equity incentive plans should not be required to recognize the share-based payment expense as accounted for in an acceleration of the vesting period. As such, enterprises can avoid recognizing large amount of expenses and ease pressure of current expense. (Note: According to China’s Accounting Standards for Business Enterprises and related interpretations, the cancellation or settlement of equity instruments is accounted for as an acceleration of the vesting period—If a grant of equity instruments is cancelled or settled by the entity or the counterparty, the enterprise should recognize immediately the amount of the expense that would otherwise have been recognized over the remainder of the vesting period.) individuals” were included into CSRC’s investor categories and non-resident foreign employees were allowed to open A-share accounts
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