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Qualifying a Group RSU Plan for France

We advised a listed group granting RSUs to its French employees under a global plan.

By Cassandre Nogues, tax lawyer·Published

The situation

The plan did not meet the French conditions for a free share award. Each delivery was therefore treated as salary, both for the group and for the beneficiaries.

Management wanted to know whether a France-specific addendum would allow the free share regime to apply, what it would cost to put in place, and whether this could be achieved without touching the global plan.

Our support

  1. 01

    Reading the global plan against the French conditions

    We went through the plan rules and an actual grant agreement, clause by clause, against the conditions set by the French commercial code and the tax code.

    Five clauses stood in the way of qualification:

    • cash settlement and net settlement;
    • dividend equivalents paid before delivery;
    • the right of set-off;
    • rounding up to the next whole share;
    • acceleration of vesting within less than one year.

    None was essential to the economics of the plan. For each, we distinguished what was a substantive condition from what could be disapplied for France alone.

    Point of attention. Corporate officers are subject to an additional condition: the regime is open to them only if a value-sharing arrangement covers at least 90% of the employees of the French entities. That condition is verified before the grant, not after.
  2. 02

    Costing the position, before and after

    We modelled both situations on the population actually receiving awards, remuneration band by remuneration band.

    The costing covered:

    • employer contributions, and the specific 30% employer contribution levied on the value at delivery;
    • employee contributions, income tax and social levies on investment income;
    • the 50% abatement available within the €300,000 band;
    • the 10% employee contribution on the fraction above that band;
    • the exceptional contribution on high incomes.
    In this case: 213 French employees, €31,400,000 of total remuneration of which €5,038,000 delivered in shares each year. The overall charge (contributions, levies and tax, for the group and for the beneficiaries) fell from €28,273,165 to €26,999,425, i.e. €1,273,740 a year: €660,260 for the group and €613,480 for the 213 beneficiaries.
    Point of attention. The order of magnitude depends on the size of the population and on the levels of remuneration within it. A smaller population can carry the work, a larger one carries it comfortably. That is why we ask for the list of grantees before examining the plan.
  3. 03

    Drafting the addendum and securing the deduction

    We drafted a French addendum, adopted once, with no amendment to the global plan.

    It covered:

    • the minimum vesting and holding periods;
    • what happens to the shares on death or disability;
    • the rewriting of the clauses on capital transactions;
    • payroll instructions and the corresponding reporting obligations;
    • the residual points, submitted to the tax authorities.

    Deducting the charge in France requires two cumulative conditions: that the shares delivered be bought back rather than issued, and that a recharge be put in place in favour of the French entity. Article 217 quinquies of the tax code.

    Point of attention. The amounts shown are given for illustration, on one set of assumptions and on the law in force at the date of the engagement.

The result

The group adopted a French addendum applying to the French entities alone, without amending the global plan or changing the grant timetable.

Deliveries now fall within the free share regime: there is no longer any tax at delivery, therefore no withholding to operate, and the employer charge is fixed by reference to the value of the shares when they are delivered.

The running cost of the addendum was presented to the board against the expected saving, costed on the actual population rather than on an average.

This kind of review does not require rebuilding an existing plan. It consists in identifying the ancillary clauses that stand in the way of French qualification, measuring what removing them changes, and touching only those.

This case was handled by the firm, in light of the law and case law in force at the time of the engagement, and in the light of circumstances specific to it. It is presented for illustration purposes only: it does not constitute advice and does not predetermine the treatment that might be adopted in another matter.