Private ruling: ESS - foreign employer
Date of advice: 28 October 2021
Published: February 2022
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Is your working arrangement with the employer similar to employment pursuant to Item 3 of Section 83A-325 of the Income Tax Assessment Act 1997 (ITAA 1997)? | A1: Yes. Item 3 of Section 83A-325 of ITAA 1997 covers independent contractor arrangements such as the contract under which you would provide services to the foreign company through your company as an independent contractor. Division 83A applies as if you are employed by the foreign company, and the agreement between you and the foreign company constitutes the employment. | Q2: Is the share purchase plan being offered to you by the foreign company considered as Employee Share Scheme (ESS) under Section 83A-10 of ITAA 1997? | A2: Yes. Your share purchase plan arrangement meets the definition of an ESS under Section 83A-10 of ITAA 1997.

Relevant facts and circumstances: You are an Australian resident. You established a private company - Company A in Australia. Company A entered into an Independent Contractor Agreement with Entity A, a foreign company to provide your services as XXXX and XXXX. Your service was charged at an hourly rate and payable monthly. Company A has only one employee - yourself, and you perform all the key tasks in Australia for Entity A. Your tasks include XXXX and XXXX, XXXX and XXXX and XXXX and components within XXXX. Company A invoiced the foreign company based on an hourly rate. You did not work the same number of hours each week, or the same number of days each month. Under the Independent Contractor Agreement, you were granted the right to purchase shares of the foreign company's Common Stock (the Share) at a certain price per share. The Shares have not been registered under the applicable Act in Country B. You exercised the right to purchase the shares and paid foreign currency $X. You entered into a XXXX Agreement with the Country B company for the X Common Stock. You exercised the right to purchase the shares. There was no specific market value for the rights or the shares at the time you excised the right. The Shares are subject to forfeiture to or repurchased by the foreign company subject to the terms and conditions in the XXXX Agreement. The XXXX Agreement sets out the Shares vesting time.

Relevant legislative provisions: Income Tax Assessment Act 1997 section83A-10 | Income Tax Assessment Act 1997 section 83A-325