If it seems that most of my blog posts are dedicated to France, then you are correct.
For this, we can blame the many changes that have been adopted to the French-qualified regime for RSUs over the last few years, most recently discussed in my post from April 2017. And, alas, another change is on the horizon.
Less than 18 months after the latest amendment to the regime for tax-qualified RSUs in France, another amendment became effective on December 30, 2016. This amendment is the third amendment to the regime in five years, meaning that companies may (in theory) have to administer tax-qualified RSUs that are subject to three different income tax and social tax regimes. The three different qualified RSU regimes are as follows: French-qualified RSUs granted after September 28, 2012…
As described in our client alert, the new French-qualified RSU regime (Loi Macron) finally became effective on August 7, 2015. I have discussed the benefits for the new regime in an earlier blog post.
Unfortunately, the news is not all good. This is because the law provides that qualified RSUs can be granted under the new regime only under a plan that has been approved by shareholders after the effective date of the law (i.e., after August 7, 2015). Of course, we do not expect that any of our clients will ask their shareholders to approve a new plan or re-approve an existing plan just to grant French-qualified RSUs. This means that it is currently impossible for the vast majority of our clients to rely on the new regime (with the exception of only those companies that coincidentally just approved a new plan or had shareholders approve amendments to an existing plan). For these companies, until and unless their shareholders approve a plan, the conservative advice is to either not grant qualified RSUs or grant them in reliance on the old regime (with 2-year vesting and 2-year additional holding period, as well as employer social tax due at grant at a rate of 30%).
As I had discussed back in January 2015, changes to the moribund French-qualified RSU regime had been proposed by the French Government which would have made granting French-qualified RSU awards again much more beneficial to both the company and the employees. Alas, the wheels in France turn slowly and we are still waiting for the law to be adopted.
What has happened in the meantime is as follows:
The French Parliament actually adopted the proposed law at the end of February 2015. The law was then sent to the French Senate for further debate. Unfortunately, at the Senate level, the law was amended and the reduced vesting/holding periods now only apply to so-called SMEs. These are small and medium size companies which employ fewer than 250 persons and which have an annual turnover not exceeding € 50 million, and/or an annual balance sheet total not exceeding € 43 million.
Just when we thought French-qualified awards were headed for extinction due to the ever decreasing tax benefits, there is change in the air!
In November, a draft law was presented (the “Loi Macron”) which proposes a number of changes to the requirements and tax treatment of French-qualified RSUs, most of them favorable. The draft law does not propose any changes for French-qualified options.
As currently drafted, the law provides the following: