French Law – Treatment of Share Plans: The Macron Draft Bill Would, If Enacted, Improve Significantly the French Tax and Legal Treatment of Awards Under Qualifying Share Plans, Which Would Become Very Attractive Compared to Cash Bonuses or Stock Option Plans

Sullivan & Cromwell LLP - January 21, 2015

The Macron Draft Bill (projet de loi pour la croissance et l’activité) was approved on January 19, 2015 by the Special Commission of the French National Assembly, and will be discussed in the coming weeks before the French Parliament.

If enacted as currently drafted, shares granted to French resident beneficiaries under qualifying share plans (“attribution d’actions gratuites” or “AGA”) would benefit from a much improved tax and legal regime. The total duration of the vesting and holding periods would be reduced to two years (instead of four years), and the social security tax paid by the employer would be reduced to 20% (from 30%) and would be paid only if and when the shares are effectively attributed to the beneficiaries. Finally, the income tax treatment of the beneficiaries would also be alleviated, as the entire gain realized by the beneficiary would benefit from the capital gain tax regime.

Such modifications would also apply to qualifying share plans established by foreign companies for French resident employees.

The Macron Draft Bill is expected to be enacted in the spring of 2015, and would retroactively apply to qualifying share plans approved by shareholders’ meetings held as from January 1, 2015.