Pursuant to the 2014 Finance Bill, adopted and approved at the end of 2013, French employers are now subject to a new 50 percent flat tax on compensation paid to employees in excess of EUR 1 million during calendar years 2013 and 2014. Compensation includes income derived from equity compensation awards (both qualified and non-qualified awards) granted by non-French issuers where the French employer bears the cost of such awards via recharge arrangements.
The new employer-paid tax is capped at 5 percent of the employer’s turnover for the applicable calendar year and must be paid by April 20 of the following calendar year. In the case of French-qualified awards, the 50 percent tax applies at the time of grant (in addition to the 30 percent employer social taxes also due at the time of grant) based upon either:
- The value of the award determined under IFRS valuation rules, or
- A percentage of the value of the shares underlying the qualified awards.
Please see the alert here prepared by our Paris office for additional information on the other types of remuneration included in the scope of the employer-paid tax and additional details related to the deductibility of the tax for French corporate tax purposes.
The 2014 French Finance Law also adopted changes to the capital gains tax allowances for shares sold on or after January 1, 2013. As revised, shares held for at least 2 years prior to disposition are eligible for a 50 percent tax allowance (previously the allowance was 20 percent) while shares held for at least eight years are eligible for a 65 percent tax allowance.