HR and tax alert
August 2015
France
Changes to the French qualified regime of RSU awards
Executive summary
The French Constitutional Council is currently reviewing
the “Macron law” that was passed by parliament on 10
July 2015. This law includes significant changes to the
legal and tax regime of “free share” or RSU plans that
are qualified for French tax purposes.
The Council is examining whether the law conforms with
the French Constitution and it is likely therefore that the
law will not enter into force until mid-August 2015 at
the latest.
Key proposals
Reduction of acquisition and sale restriction periods
The law reduces the minimum acquisition period (from
grant to vest date) that is a current requirement of
qualified plans to one year, followed by a one year sale
restriction from the vesting date from when the shares
are delivered. The law removes the requirement for a
sale restriction period if the acquisition period is for at
least two years, in which case the shares can be
disposed of immediately upon vesting.
Tax treatment of acquisition gain
The deemed acquisition gain (the fair market value of
the shares at vesting date), will be taxed under the same
rules that apply to capital gains rather than rules that
apply to employment income.
The gain would therefore be subject to individual income
tax at the progressive rates, currently up to 45%, and
could benefit from a reduction in the taxable basis of
50% if the shares are held for more than two years after
vest. This rises to 65% if the shares are held for more
than eight years after vesting.
In addition, the acquisition gain will be subject to the
15.5% social taxes due on investment income
(calculated on the amount before any reduction in the
taxable base). This is up from 8% under the current law
but an additional 10% employee social contribution due
upon the sale of the shares by the beneficiary will be
removed.
Current tax treatment of
French qualified free
share awards
(applicable to awards
granted since
28 September 2012)
Tax treatment of
qualified gain based on
law adopted by the
French Parliament on
10 July 2015
Income tax
Progressive income tax
rates (currently up to
45%)
Progressive income
tax rates (currently up
to 45%) with potential
reduction of the
taxable base of
50%/65% if the shares
are held more than 2
years after vesting
Social taxes
8%
15.5%
Employee social
contribution
10%
-
Reduced the employer social contribution
The employer social contribution, currently due at a rate of 30% at grant, will
be replaced by an employer social contribution due:
(i)
At a rate of 20%,
(ii)
At the time the shares are delivered to the employee and;
(iii)
Assessed on the fair market value of the shares at the vesting
date.
In addition, provided certain conditions are met, the employer contribution
would not be due for companies considered as “small” and “medium” sized
enterprises under EU regulations.
Entry into force
This new law and tax regime would apply only to French qualified free share
awards granted in accordance with the authorization of a shareholders
meeting, or another corporate body empowered to do so according to the
local law of the issuing company, given after the law enters into force.
As the French Constitutional Council is examining the law in order to decide
whether it agrees with the French Constitution, the law will not enter into
force before the Council has completed its review. This is expected to be
around mid-August 2015 at the latest.
Next steps
Employers should consider whether their shares awards plans for French
based employees meet the qualifying requirements and whether
implementing or amending a French qualified free shares awards plan may
provide a tax benefit for employees.
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Colin Bernier
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Email: [email protected]
Stanislas Dujardin
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Email: [email protected]
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