Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAFrance4. Taxation of "non-qualified" employee share plansThe taxation of employee share plans which do not qualify for French favourabletax and social security treatment is as follows:4.1 Taxation of share acquisitions 174.1.1 Employee tax and social security contributionsTax: Where shares are acquired for free or at a discount, employeesare subject to income tax on the difference between the value of theshares at the date of acquisition and the amount paid by the employee(if any). For the tax year 2010, the rate of income tax varies from 0% to40%.Social security contributions: The amount subject to income tax isalso subject to employee social security contributions at an approximaterate of 20-30%, subject to earnings caps. The applicable rates andearnings caps depend on the nature of employment. 18 The rates ofsocial security contributions and the earnings caps may be varied twicea year (in January and July).4.1.2 Employer tax and social security contributionsCorporation tax deduction: No corporation tax deduction is availablefor a French employing company on the acquisition by French residentemployees of shares in a French or a non-French parent company byway of gift or at a discount to market value. However, where a French ora non-French parent company recharges the costs of providing existingshares to employees of the French employing company, the French1718The acquisition by a French employee of shares in the foreign parent of his French employer, either asa gift or at a discount to market value, is considered to be a benefit-in-kind, with the consequencesdescribed in paragraph 4.These rates vary depending upon the professional category of the employee concerned(executive/non-executive), the business sector in which the employing company operates, thecollective agreements applicable to the employing company and the commitments made by theemployer, if any. These rates decrease quite substantially along with the increase in remunerationabove €250,000 (e.g. for an annual remuneration of €500,000: approximately 35% of employer's socialsecurity contributions and 15% of the employee's contributions). This is because the basis on whichmost social security contributions are calculated are capped between one to eight times the socialsecurity ceiling (fixed at €2,885 per month for 2010).UK/1729295/03 59 September 2010