Employee Share Plans in Europe and the USA - Sorainen

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Employee Share Plans in Europe and the USAFranceor in proportion to wages, or by virtue of a combination of thesecriteria.5.1.3 Disposal: Tax is charged at disposal on both the acquisition gain andthe disposal gain. The acquisition gain is the difference between themarket value of the shares on exercise and the exercise price, less anygain taxed on exercise. The disposal gain is the difference between thesale proceeds and the market value of the shares on exercise.There are three possible tax treatments of the acquisition gain,depending on how long the shares have been held. The tax charge isreduced the longer the shares are held from the date of grant (not thedate of exercise) 30 . The disposal gain is subject to capital gains tax atthe rate of 30.1% for 2010 income.30The three treatments are as follows:a) Shares sold before the 4th anniversary of the date of grant:• income tax at the employee's marginal rate; and• employee social security contributions (approximate rate of 20-30%) and employer socialsecurity contributions (approximate rate of 45-50%).In the event of dismissal, death, disability and compulsory retirement, shares sold before the 4thanniversary will be taxed in accordance with (b) below.b) Shares sold between the 4th and 6th anniversaries of the date of grant (regardless of how long theyhave been held) and shares sold after the 6th anniversary of the date of grant but which have notbeen held for two years from option exercise:• 42.1% (30% + CSG 8.2% + CRDS 0.5% + social tax 2% + additional contribution of 1.4%) up to€152,500 for the 2010 income;• 52.1% (40% + CSG 8.2% + CRDS 0.5% + social tax 2% + additional contribution of 1.4%)above that amount for the 2010 income.Alternatively, the option holder may elect to be charged to income tax at his marginal rate of up to40% (e.g. if his actual marginal income tax rate is lower) plus additional contributions of 12.1%(CSG 8.2% + CRDS 0.5% + social tax 2% + additional contribution of 1.4%) for 2010 income.c) Shares sold after the 6th anniversary of the date of grant having been held for at least 2 years fromoption exercise:• 30.1% (18% + CSG 8.2% + CRDS 0.5% + social tax 2% + additional contribution of a 1.4%) upto €152,500;• 42.1% (30% + CSG 8.2% + CRDS 0.5% + social tax 2% + additional contribution of 1.4%)above €152,500.Alternatively, the option holder may elect to be charged to income tax at his marginal rate of up to40% plus additional contributions of 12.1% as above. The income tax rates range from 0% to 40%for 2010 income.UK/1729295/03 65 September 2010
Employee Share Plans in Europe and the USAFranceIn addition, the acquisition gain resulting from the exercise of optionsgranted since 16 October 2007 31 is subject to a 2.5% employee socialsecurity contribution.To benefit from the favourable tax regime, it is also necessary to complywith certain filing requirements. Companies offering options to theiremployees are required to issue, on or before 15 February in each year,individual statements in respect of each employee who (i) has exercisedoptions during the course of the preceding calendar year 32 and/or (ii)during the course of a calendar year, has sold or converted into bearershares, shares acquired on the exercise of an option before the end ofthe four-year holding period from the date of grant.5.2 Favourable tax regime for free sharesIn order to encourage employee share ownership in France, the French 2005Finance Act introduced a new regime consisting of the grant of free shares toemployees and executive officers 33 . Prior to this law, the grant of free shareswas not governed by any specific regulation and the tax and social securityregime was not favourable.The favourable tax regime is available for employees of French companies inrelation to free shares granted by their employer or by a domestic or a foreign313233The 2.5% contribution was introduced by Article 13 of the 2008 French Social Security Financing Billand applies to options granted since 16 October 2007. It applies to options granted to beneficiarieswhose remunerations or gains are subject to a compulsory French social security regime.Where options are granted over the shares of a non-French parent company, these individualstatements must be issued by the French employing company.Two copies of each individual statement must be issued. One copy must be sent to the tax authoritieson or before 15 February. The other copy must be given to the employee and should be filed, togetherwith his tax return (generally around 1 March), at his local tax office.If, in the course of a calendar year, shares acquired on the exercise of an option are sold or convertedinto bearer shares before the end of the four-year holding period, the company must issue an individualstatement (again two copies are required), on or before 15 February of the following calendar year,indicating the date on which the sale or conversion occurred, the date of the grant and exercise of thecorresponding options, the number of shares concerned, the purchase or subscription price of theshares and their value on the date of exercise. In the event of an exchange of shares (as a result of apublic offer of exchange, a merger etc.), the above-mentioned filing obligations are transferred to thecompany whose shares are granted in exchange (or its French subsidiary, if it is a foreign company).Articles L. 225-197-1 to L. 225-197-6 of the French Commercial Code. New provisions were alsointroduced by Law No 2006-1770 dated 30 December 2006 relating to employees' participation andshareholdings.UK/1729295/03 66 September 2010
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Employee Share Plans in Europe and the USA - Sorainen

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