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Tapestry Alert: France -Tax favoured “Macron” free
share awards – the tax benefits are reducing!
December 2016
Dear Client,
Just before Christmas the French Parliament voted to reduce the tax
benefits of these plans for both the employer and the employee.
What are Macron
awards?
Macron awards are tax-qualified free shares. The regime was
introduced in 2015 by former Economy Minister Emmanuel Macron, and
has been highly political ever since.
The rules to qualify for the tax benefits are tricky, and many
non-French companies have struggled with the rules governing the
implementation of these plans.
What’s going to
change?
There will be two key changes to the tax regime for qualified free
share awards:
- to the extent any acquisition gain exceeds
EUR300,000 annually, the portion exceeding that amount will be
taxed as salary, rather than as a capital gain; and
- the employer social security due on
acquisition of the shares will increase from 20% to 30%.
Taxing part of the acquisition gain
as salary means that favourable tax allowances (of up to a 65%
reduction in the size of the gain for tax purposes, depending on how
long the employee holds the shares) will not be available on that
portion of the gain. This means that the effective tax rate on any
gain exceeding EUR300,000 will increase significantly.
When do these
changes start to apply?
The new, less favourable, regime will only apply to grants that are
authorised by shareholders after publication of the French Tax Bill
(which is expected to happen no later than 31 December 2016).
It is unclear at this stage whether and how this new regime
will apply to grants of qualified free share awards made in 2017 by
non-French companies that did not (and did not need to) obtain
shareholder approval.
These changes will not affect qualified free share awards that
were granted prior to publication of the French Tax Bill, and these
awards will continue to benefit from the existing, more favourable
tax regime (subject to complying with the French rules).
Tapestry
comment:
It is welcome to
learn that the changes will not apply to existing qualified free
share awards.
The increase in the
employer social security contribution from 20% to 30% is an expected,
albeit unwelcome, change. However, the increased rate is still lower
than the employer social security contribution payable in relation to
a French non-qualified free share award. As such, there could still
be some saving in granting free share awards under the new regime.
The proposed
taxation of acquisition gains as salary only applies to gains over
EUR300,000. Nevertheless, the change represents a significant reduction
to the tax benefits available, particularly for those companies
wanting to grant significant awards to senior individuals in France.
The most important
point for many non-French companies will be whether future awards can
qualify under the old regime if they do not need shareholder
approval. We will monitor developments in this area and keep you
updated.
If you have any questions in the meantime regarding this newsletter,
or any other topics, please do contact us - we would be delighted to
help!
Bob and Emma
 
Bob Grayson
Emma Parker
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