Free Shares and the 2017 Budget Act—The Macron Law Provisions Are Being Adapted for the Future—by Jérôme Commerçon and Raphaël Bagdassarian
Free Shares and the 2017 Budget Act:
The system established by the Macron Law is being adapted for the future
The 2017 Budget Act was passed in its final reading by the National Assembly on December 20, 2016. With regard to the bonus share program, the changes made are, in summary, as follows:
- On the one hand, the amendment passed on October 25, as we noted in our previous alert dated October 27, was removed from the final text. It is worth noting here that this amendment would have fundamentally altered the free stock regime introduced by the Macron Law (Law No. 2015-990 of August 6, 2015) and, in particular, would have retroactively reclassified capital gains from the acquisition of such stock as wages and salaries for tax purposes.
- In addition, Article 61 of the Finance Act, which was adopted through an amendment, introduces the following changes to the bonus share program:
─ Capital gains will continue to be subject to the current tax regime introduced by the Macron Law, though subject to an annual limit of 300,000 euros per beneficiary:
- taxation of the gain on the sale of the property under the capital gains regime, which allows for deductions based on the length of ownership; and
- application of social security contributions at the consolidated rate of 15.5% (income from assets).
─ However, the portion of the capital gain that exceeds this annual limit will be taxed according to the rules that applied prior to the enactment of the Macron Act:
- taxation of the capital gain at the progressive income tax rate applicable to wages and salaries;
- application of social security contributions at the consolidated rate of 8% (employment income); and
- A 10% employee contribution, to be paid by the recipients of the free shares.
─ An increase in the employer contribution to 30% (up from the current 20%).
All of these changes will apply to bonus shares whose issuance was authorized by a resolution of the extraordinary general meeting held after the publication of the 2017 Finance Act. Therefore, there is no longer any question of retroactive application of the new provisions.
