Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAFrance6.3 Capital gains: Capital gains realised by the employees on the disposal of theirinvestment are exempt from income tax provided that the disposal occurs afterthe 5-year (or, if applicable, 10-year) holding period (or before 5 or 10 years inthe early release circumstances specified by French law referred to aboveapply). The gains remain subject to social taxes payable at 12.1% by theemployee.6.4 Other tax advantages of a PEE: An employee may use the funds in his PEE atany time during the holding period to exercise stock options that satisfy therequirements of the French tax-favoured option regime. This is subject to thecondition that the shares acquired on exercise of the options are immediatelyplaced in the PEE for a holding period of 5 years from the date of exercise withno possibility of an early release. In these circumstances, the funds used toexercise the options will be subject to (i) CSG at 8.2% (ii) CRDS at 0.5% (iii)social levy at 2% and (iv) an exceptional contribution of 1.4% at the time ofexercise. The shares will be treated as having been acquired at the exerciseprice plus the proportion of any discount exceeding broadly 5% of the marketprice of the shares at grant and will benefit from the normal PEE tax treatment 52 .CSG and CRDS (rate of 8%) regardless the duration of the spreading of instalments (Circular 14September 2005, Employee Savings Plan, Schedule 4).52Where the option relates to listed shares, the shares will be treated as having been acquired at theoption exercise price plus the proportion of any discount exceeding:• in the case of options to subscribe for new shares, 5% of the average quoted price of the sharesover the 20 dealing days preceding grant; and• in the case of options to purchase existing shares, 5% of the higher of:- the average purchase price of the shares held by the company at the date of the grant ofoptions; and- the average quoted price of the shares over the 20 dealing days preceding grant.Although profit sharing bonuses (intéressement) are, under certain conditions, exempt from socialsecurity contributions, they are normally subject to income tax at the progressive rates, and to CSGand CRDS (8%) on 97% of their amount. Furthermore, the employer should pay a 4% contribution(forfait social).An income tax exemption is available, under certain conditions and subject to certain limits, if theemployee transfers his profit sharing bonus into a PEE and the following conditions are met:• the transfer must occur no later than 15 days after the bonus has been paid;• the funds invested in the PEE must not be available to the employee for a period of five years(subject to certain exceptions); and• the bonus amount which may be exempted from income tax under these rules is limited to 50% ofthe annual social security ceiling for the year concerned (i.e. 50% x €34,620 = €17,310 in 2010).UK/1729295/03 73 September 2010