Amy Reina Deloitte Tax LLP GEO Boston Chapter Presents Update on FranceRecent Tax Law Changes General Overview New Tax Law and Proposed Tax Increase Qualified plan changes Where Do we Go From Here ID: 377617
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Slide1
May 7, 2013Amy ReinaDeloitte Tax LLP
GEO Boston Chapter Presents:
Update on France-Recent Tax
Law ChangesSlide2
General OverviewNew Tax Law and Proposed Tax Increase
Qualified plan changes
Where Do we Go From Here?
2
A
gendaSlide3
3
I am so pleased to be a Russian citizen!
Welcome Gerard!Slide4
What has already changed?
4
From July 11, 2012
Qualified grants: Employer tax at grant increased;
From 14% to 30%
Contribution on high revenue CHR – ALL CATEGORIES
3% / 4 %
From January 1, 2011
From January 1,2012
Social surtaxes on investment income increased;
From 13.5% to 15.5%
From August 18, 2012
Qualified plans: Employee contribution increased;
From 8% to 10%
From August 1, 2012
Forfait social rate on all-employee profit sharing schemes
Increased to 20%
Individuals leaving France are subject to capital gains tax on unrealized gains (“exit tax”)
From March
3,
2011 Slide5
2013 Key Rate Changes
5
Subject to progressive income tax rates. Overall top marginal rate including CHR and social surtaxes is 64.5%40% deduction for dividends brings overall top marginal rate to 46.5%
Some exceptions (life insurance / PEA)
New withholding tax
Dividends and Interests
Subject to progressive income tax rates.
Taper relief of 20% to 40% bringing top overall rates to between
46.5
% and
64.5
%.
Some exceptions: entrepreneurs / reinvestments
Income Tax
New tax
bracket
:
45%
for 2012 annual income bracket over €
150,000
;
75% rate proposal struck down, but has been reintroduced;
Wage tax (Taxe sur les salaires) increased to 20% at top bracketSlide6
75% Company Tax
French President announced his intention to reintroduce a temporary 75% personal income tax on income earned in excess of EUR 1 Million. Last December, the High Court struck down the 75% tax. Not an employee income tax rate this time around, but a 75% company tax.
What does this mean for you?Company social charges & payroll taxes on this income already capped at 25%.Additional tax amounts to an additional 50% in taxes applied.Temporary tax will apply for 2 years.Draft legislation expected in July
6Slide7
Qualified vs. non-qualified plans
The 2013 Finance Bill amended the tax treatment of qualified awards- no longer the same tax advantages for employees
7
Are qualified plans worth pursuing?
The
The main benefit of a qualified plan is tax deferral to date of sale; and company tax savingsSlide8
Stock Options - Qualified v Nonqualified
Qualified Tax Treatment
Non-qualified Tax Treatment
For qualified grants after October 16, 2007 and before September 28, 2012
For qualified grants on or after September 28, 2012
Non qualified grants
Employee
Tax
Sale
Exercise
Employee Income Tax
18%,
30%, 41%
Progressive rates up
to 45%
Progressive rates up to 45%
Employee Social Contributions
Sale
Exercise
Basic social security contributions
NA
NA
23%-8.85%
CSG
15.5
%
8
% (5.1% deductible)
CRDS
Employee contribution
10%
10%
N/A
CHR (High Income Contribution)
3-4%
3-4%
3-4%
Employer Social Contributions
Grant
Exercise
Basic social security contributions N/A45%-26.5%Employer contribution30% 30% N/A
8Slide9
Free Shares- Qualified v Nonqualified
9
Qualified Tax Treatment
Non-qualified Tax Treatment
For qualified grants after October 16, 2007 and
before September 28, 2012
For qualified grants on or after September 28, 2012
Non qualified grants
Employee
Tax
Sale
Vest
Employee Income Tax
30%
Progressive rates up to 45%
Progressive rates up to 45%
Employee Social Contributions
Sale
Vest
Basic social security contributions
NA
NA
23%-8.85%
CSG
15.5
%
8
% (5.1% deductible)
CRDS
Employee contribution
10%
10%
N/A
CHR (High Income Contribution)
3%-4%
3%-4%
3%-4%
Employer Social Contributions
GrantVest
Basic social security contributions
N/A
45%-
26.5
%
Employer contribution
30%
30%
N/ASlide10
New lawWhat does not change – Qualified Plans
New qualified awards will still benefit from the employee deferral of income and social tax until the sale of the shares
Company tax of 30% remains payable at grant : choice on taxable basis => strongly recommended to do an plan specific IFRS 2 valuation to reduce employed costsFull exemption from any type of social charges and taxation as capital gain on sale of shares remain for “start-up” company stock option plans : maximum rate is 19% plus 15.5% = 34.5% (before CHR) 10Slide11
New lawWhat does
change – Qualified Plans
New flexibility with holding periods:Stock options – no longer required?Free shares – if release is year 4, no longer required?This is a strict reading of new code articles – may be unintendedReporting at grant linked to social security exemptionStay tuned for legislation in summer/fall 201311Slide12
New employer qualified plan reporting obligations DADS Reporting is due by the end of January 2014 for calendar year 2013.
For year of grant for free shares/stock options (reporting at grant tied to employer social security exemption)
For year of exercise for stock options For year of vest for free shares French sourcingIn some cases, individual certificates to be filed with tax administration directly
12Slide13
Employer withholding obligationsWithholding obligation for
French non-residents -
both qualified and non qualified plans. Qualified options/awards granted prior June 20, 2007 not subject to any withholding. The plan administrator or the broker is often the responsible party for any withholding due on qualified awards/options at sale.
13
Company action items:
Identify responsible party for withholding (plan administrator ? broker ? )
Ensure responsible party is complying
Alternatives if not complying: in-house/outsourcing/French brokerSlide14
Wage taxBeginning in 2013, for equity compensation exceeding EUR 150,000, an additional wage tax will be payable at a rate of
20%
by the employer where the business is VAT exempt. So generally applicable to financial industry.The legislation is currently unclear and further clarification is being sought in the wage tax application to qualified equity plans.14Slide15
Action Steps15
Look at impacts for your population
Qualified plans vs. non qualified: not always obvious; remember IFRS2 tax basis, employee deferralSpecific attention on international mobility: movement out of FranceBeware not to disqualify outstanding qualified awards=> Additional social chargesNew flexibility on holding periods
Eligible for start-up stock option regime? No company taxes; 34.5% Slide16
Questions?Slide17
Contact information
Amy Reina
Senior Tax ManagerDeloitte Tax LLP(1) 203 708 4622 amyreina@deloitte.comSlide18
This presentation contains general information only and Deloitte is not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this presentation.Slide19
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