The French Finance Act 2013 (the "Finance Act") has made important amendments to the treatment of social security contributions paid in respect of stock options and supplementary retirement schemes.

Stock Options and Allocation of Free Shares. The Finance Act implements new conditions that must be met in order for the proceeds of stock options and share sales (where the stock option or free share awards were granted on and after 28 September 2012) to benefit from an exemption from social security contributions.

Before the Finance Act, such stock awards benefited from an exemption from social security contributions when the options or shares were held for a period of four years before the options were exercised or the shares sold. Under the Finance Act, this four-year "holding" period has been abolished. For the exemption to operate, the employer must notify the French Social Security Administration of the name of the beneficiaries as well as the number and the value of shares allocated to each of them.

The Finance Act also now classifies the proceeds of stock options and share sales as salary income that is subject to the income tax regime. It further treats stock options and free share allocations as regular salary income for the purpose of CSG/CRDS contributions. The contribution rate is 8 percent. (CSG/CRDS contributions are specific contributions that are usually deducted from employee's remuneration and which finance, in particular, state health, welfare and retirement schemes.)

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