These measures have to be passed by the Senate before becoming final. However, the attempt to change, to harden, the tax and social regime of free shares gains, introduced by the Act dated August 6th, 2015, has so far been rejected.
In addition, the French tax authorities issued new regulatory comments on June 13th, 2016 to specify the rules applicable to foreign free share plans.
Attempt to remove the regime of free shares gains introduced by the Act dated August 6th, 2015
Amendments to abolish the more favorable tax and social regime established by the Act dated August 6th, 2015 were rejected or withdrawn. The French Minister and the French “Rapporteur” of the Finance Committee suggested that this issue will be brought up again in the forthcoming Finance Law this autumn.
For the records, please note that some members of the National Assembly intend to revert to the following points:
Firstly, as regards free shares gains, it was proposed that the acquisition gain will be taxed in the category of wages and salaries and the specific exemption of employee social contribution will be removed (See Amendments: No. 160 withdrawn, No. 1286 dismissed and No. 1398 withdrawn);
In addition, the amendments also provided that the rate of employer social contribution will increase from 20% to 50% for free shares and stock-options gains (See Amendments: No. 160 withdrawn, No. 1286 dismissed and No. 1398 removed).
We observe that these amendments resumed, largely, the provisions of Article 1 Bis of the Proposed Act to regulate wages in enterprises, adopted by the National Assembly in first reading on May 26th, 2016 and for which no date for examination by the Senate has been set.
Adjustments of the legal regime of stock-options
Members of the National Assembly have recently adopted two adjustments concerning the procedures for determining the subscription or purchase price of the options when the shares of the company are admitted to trading on a regulated market. (See Amendments adopted No. 515 and No. 516).
Henceforth, the subscription or purchase price cannot be less than 100% (instead of 80%) of the average opening price of the shares of common stock during the 130 trading days (instead of 20) preceding the day on which the option is granted.
Authorization to grant free shares awards taken by the ad hoc body of the foreign company after the entry into force of the Act dated on August 6th, 2015
The French tax authorities issued regulatory comments on June 13th, 2016, specifying that “the regime of free shares resulting from Act No. 2015-990 of August 6th, 2015 for the growth, activity and equal economic opportunities is applicable only to the free shares whose grant was authorized as from August 8th, 2015, by the duly entitled ad hoc body of the foreign company”.
This new French tax regulatory includes notably the French tax regulatory comments of August 12th, 2014, which refer, for the adoption of foreign qualified plans, to an ad hoc body of the foreign company which may be different from the body responsible for decisions related to share capital.
Moreover, please note that “the adoption of a sub-plan by the board of directors or equivalent as from August 8th, 2015 relating to a prior authorization to grant free shares cannot benefit from this new regime”.
Further to the parliamentary debates, it was stated that the exchanges on the text were likely to be relatively long, and for this reason those provisions were presented in the framework of the law on transparency of economic life.
At present, the French Minister of Finance has confirmed that a legal reform of free shares gains would not be envisaged.
We will keep you informed of the result of parliamentary debates. Thus, before its final adoption and entry into force, please note that the text should be debated and approved by both the National Assembly and the Senate which will be able to amend it.