Draft Finance Tax Act for 2017 : Amendment on the free shares taxation

An amendment to the Draft Finance Tax Act for 2017, presented to the Finance Committee of the French Parliament on October 12, 2016, aims to modify the free shares tax and social regime provided for by the article 135 of the Law n. 2015-990 for growth, business and equal economic opportunity (i.e. “Macron Act”).

The main measures of the amendment

Taxation of the acquisition gain as employment income

The article 80 quaterdecies-I of the French Tax Code is modified as follows: “The gain corresponding to the value, at the acquisition date, of the free shares granted further to the provisions of the Articles L. 225-197-1 to L. 225-197-3 of the French Commercial Code is taxed in the hands of the beneficiary as employment income.”

Therefore, this amendment proposes to tax the acquisition gain as employment income instead of capital gain.

Considering the above, the acquisition gain would not benefit from the taper relief anymore which would be only applicable on the shares sale gain. This new regime would lead to a tax increase of approximatively 20% for the concerned free shares’ grants.

Employer contribution rate of 30%

This amendment proposes to increase the employer contribution’s rate to 30% instead of 20%.

This contribution would be applicable on the basis of:

  • The right value of the shares as estimated by the preparation of the consolidated financial statements for the companies subject to the international accounting rules; or
  • The value of the shares at the Board of Directors or Management Board’s decision date related to the grant of free shares.

This choice is made by the employer for the entire fiscal year and concerns all the grants made during this period; the choice is irrevocable for this period.

The exemption from employer contribution is only maintained for small and medium-sized enterprises (SMEs) having not proceeded to dividend payments.


We note that this new regime, if adopted, aims to significantly increase the free shares taxation.

Consequently, we recommend to all the listed or not listed companies, big companies, SMEs, mid-sized companies and start-up to implement free shares scheme on the basis of the current provisions.

We will keep you posted of any further development.

Christina Melady

Christina Melady, Partner, has over 23 years’ experience practicing tax law in France and advises both companies and managers on personal tax matters. Christina created the specialized practice in France […]

Alexis Fillinger

Alexis Fillinger has more than 16 years of practicing. He advises both companies and individuals on personal tax related matters. He has developed his expertise in management, carried interest, co-investments, […]

Nicolas Meurant

Nicolas Meurant, Partner, has over 23 years’ experience providing advice to corporations and individuals in individual tax and Global equity area, in the structuring of shareholding schemes, as well as […]