Creation of free share awards to employees and executives and of their tax and social security treatment

Article 83 of the 2005 Finance Act creates in the Commercial Code (Articles L. 225-197-1 to L. 225-197-5) a scheme for awarding free shares to employees and corporate officers, authorised by the extraordinary general meeting, with a vesting period and a holding period of at least two years each, and a cap of 10% of share capital. For tax purposes, the acquisition gain is taxed at 30% on sale, unless the employee opts for the salary regime, and any later gain at the standard capital gains rate (Articles 80 quaterdecies and 200 A, 6 bis of the General Tax Code). Shares awarded under these conditions are excluded from the social contributions base. The tax rules apply from 1 January 2005.