Stéphanie Le Men-Tenailleau
In our article dated 21rst September 2015, we outlined that questions remained unanswered with respect to the application of the changes brought by the Maron Act to foreign companies granting free shares to employees of their French subsidiaries. Some guidelines may be found in respect thereof in the tax regulations published by the French tax authorities on 13th June 2016.
The law n°2015-990 dated 6th August 2015 significantly amended the legal, tax and social security regime of free shares grants. The law specifically provides that the new regime shall apply to grants made by French companies, provided such grants were authorized by a Shareholders’ decision of the granting company made after 7th August 2016.
As indicated above, the law did not mention any specific guideline as to how such rule would be applicable to foreign granting companies. The French tax authorities therefore provided in a tax regulation published on 13th June 2016 :
“The regime of free shares as provided by the law n°2015-990 dated 6th August 2015 (…) exclusively applies to free shares which grant was authorized, as from 8th August 2015, by the ad hoc authorized body of the foreign company. The adoption of a sub-plan by the board of directors or equivalent as from 8th August 2015 related to an authorization granted before such date shall not give right to the benefit of the new regime.”
The position of the French tax authorities pursuant to this regulation is that the French procedure involving a prior authorization of the grant of free shares by the Shareholders of the granting company, followed by a grant decision by the Board of directors, is not strictly applicable to foreign companies. However, the tax authorities have indicated for some time that, practically speaking, two decisions must be distinguished in the procedure of grant of free shares, including when the grant is decided by a foreign company:
- The decision to authorize the grant of free shares; and
- The decision to grant such free shares.
Each decision must be made by the appropriate body within the granting company, but nothing in the regulation prevents both decisions to be taken by the same body (although it would not be extremely consistent), provided it is effectively empowered for such decisions in accordance with the applicable rules of the country of the granting company.
The application of such position shall be rather easy in countries where a prior authorization by the Shareholders is required to implement equity plans (although this condition may prevent many foreign companies from benefiting from the new regime until the date of the next shareholders' meeting related to equity plans), but it remains unclear under which conditions the French tax authorities will accept to apply the new regime in countries where no prior authorization is required.