France’s new 2013 Finance Act (Law 2012-1509) has completely amended the tax and social contribution regimes for stock options and restricted stock units (RSUs). (Prior coverage of the Finance Act: Tax Notes Int’l, Feb. 4, 2013, p. 438.)

For shares granted after September 28, 2012, the acquisition gains realized on the exercise of stock options/RSUs are taxed as compensation at progressive individual income tax rates of up to 45 percent (this new 45 percent tax rate applies to net taxable income exceeding €150,000 earned in 2012). Taxation is still deferred until the sale of the shares, however.

For employees, the new regime means that acquisition gains could be subject to the maximum progressive tax and social contributions amounting, in aggregate, to approximately 61 percent, not including the existing surtax (of 3 percent or 4 percent) that may be applicable to high earners.

The French Constitutional Court struck down a provision that would have increased the employee contribution to 17.5 percent, or to 22.5 percent if the required holding period from the grant date (four years for stock options and two years for RSUs after the twoyear vesting period) was not met.

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