Modernizing the Tax Collection Process in France

Transcription

1 Modernizing the Tax Collection Process in France Colin Bernier, Partner, Ernst & Young Agnès Charpenet, Partner, Baker & McKenzie SCP Franck Duez, Director, Banque Transatlantique

2 Agenda Part 1: The new French income tax withholding system Part 2: Impact of the new French withholding tax regime on Equity Awards Part 3: New tax rules for RSU French qualified plans

3 Part 1 The new French tax withholding system for employment income starts in 2018

4 What is changing? Currently income is declared and taxed the following year In 2018, compensation income will be immediately taxed through an employer monthly withholding obligation Different tax rates might be used: o The exact «household» rate communicated by the tax authorities to the employer o A neutral tax rate, if employee does not want his/her employer to be informed of his/her exact «household» rate

5 What is changing? All compensation except few ones will be concerned: standard employment income An annual income tax return will still have to be filed the following year (in 2018 for 2017 income, in 2019 for 2018 income) A tax credit will be applied in 2018 to neutralize the 2017 income tax on compensation income

6 Questions? Is there a risk of double taxation in 2018? 2018 income tax exceptional income tax? Are equity plan gains exceptional or non exceptional income? Is there a different wittholding tax treatment between qualified / non qualified plan gains for Resident and Non resident? How to anticipate the implementation of the new withholding tax system for your local and mobile employees?

7 Part 2 Impact of the new French income tax withholding system on Equity Awards

8 Equity awards / New withholding tax system French-qualified awards: Vesting/exercise gains are excluded from the new withholding tax system No change : reporting and taxation of beneficiary at sale of shares (year after) and no withholding obligation for employer To note: gains are not taken into account for the determination of the withholding tax rate applicable to employment income subject to withholding tax

9 Equity awards / New withholding tax system French non-qualified awards: Gains treated as compensation income (i.e. benefits) and therefore are included in the French withholding tax system The question is : Is a NQ award an exceptional income for the tax credit to be implemented in 2018 to neutralize the French income tax on 2017 compensation income

10 Questions Concerning non qualified awards Which parties are involved in the withholding tax system and reporting : granting company? Administrator? Participant? Can French payroll communicate tax rates to foreign administrator? Individual rates? Does your grant documentation for France need to allow for the withholding of the income tax? What about mobile employees: French source vs. non-french source gain Update your Employee Tax Information

11 Part 3 Once again the French tax rules on qualified plans have changed The 2017 new RSU French qualified regime

12 What s changing for participants?

13 Illustration of the change?

14 Growing complexity for participants

15 Illustration of complexity

16 What s changing for the employer

17 What s changing for the employer

18 Illustration of the change

19 Discussions Is it still possible to use an authorization of shareholders meeting adopted before December 30, 2016 for the application of the new «2017 finances law tax rules»? Specific issue for the French affiliates of foreign granting Companies What impact for grants which are still subject to vesting period? What impact for Shares vested by not sold yet? How to apply the 300 K ceiling?

20 Thank You Agnès Charpenet Baker & McKenzie SCP Colin Bernier Ernst & Young Franck Duez Banque Transatlantique

21 Thank You Thank you for attending GEO s 18 th Annual Conference in Rome. We hope you enjoyed this session. If you require CPE Credit, don t forget to Sign Out Two ways to give us your feedback on this session o Mobile app o Paper surveys available at the door