Finance Tax Act for 2017: Final adoption of the new free shares taxation regime by the French Parliament

The article 61 of the Finance Tax Act for 2017, definitively adopted by the French Parliament on December 20, 2016, modifies 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”). As the Finance Tax Act for 2017 has been recently adopted by the French Parliament, it may still be deferred to the French Constitutional Council which might condemn these new measures.

Measures adopted

Taxation of the acquisition gain as employment income above EUR 300,000

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 pursuant to the paragraph 3 of the article 200 A, within an annual limit of EUR 300,000. The portion of the gain exceeding this limit is taxed as employment income”.

Thus, the acquisition gain will continue to benefit from the taper relief regime based on the holding period of the shares, but within the annual limit of EUR 300,000. The gain exceeding this limit will be taxed, for the surplus amount, as employment income.

Furthermore, the gain will be subject to the social security surcharges at the rate of 15.5 % for the portion of the gain below EUR 300,000 and at the rate of 8% for the surplus amount.

Employer contribution rate of 30 % and restoration of the employee contribution of 10 %

The employer contribution’s rate is increased to 30% instead of 20%. The small and medium-sized enterprises (SMEs) having not proceeded to dividend payments are exempted from employer contribution.

The employee contribution of 10% is restored for the portion of the acquisition gain exceeding EUR 300,000 and taxed as employment income.

Entry into force

The new provisions will be applicable for the grants made further to a shareholders approval dated after the publication of the law.


  • This modification is a new illustration of the French tax law instability.
  • The SMEs should use this new favorable free shares’ tax & social regime before new modifications occur.
  • When the groups do not fulfill the definition of SMEs, they will need to identify the grants made and/or that might be made further to the current regime (applicable as from August 8, 2015).
  • The grant of free shares in 2017 further to French qualified plans is still preferable if compared with non-qualified schemes and/or classical variable remuneration schemes.
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 […]