France backs wider tax deferral for employee share takeovers

Assembly vote adds a new qualifying route

The Assembly adopted identical amendments I-3652 and I-3866 by 39 votes to 10 during first reading of Finance Bill 3210. The government gave an unfavourable opinion. The measure would amend paragraph III of Article 80 quaterdecies of the General Tax Code, but the Finance Bill remains under parliamentary consideration: the vote is a proposal, not an enacted tax change.^[1][2]

Current treatment is narrowly drawn

Article 80 quaterdecies treats the acquisition benefit on qualifying free shares as employment income and generally taxes it for the year in which the beneficiary disposes of, sells, converts or leases the shares. Paragraph III preserves that timing treatment for certain contributions of free shares to another company. Among its conditions, the contributor must hold less than 10% of the issuer, the original award must have benefited all employees and the recipient company must hold less than 40% of the issuer’s capital and voting rights.^[3]

A workforce-and-payroll alternative

The adopted wording would preserve the all-employee route and add an alternative. The deferral could also apply where the award benefits at least 50% of the awarding company’s employees and those employees represent at least 25% of its total gross payroll, applying the tests in Article L225-197-1 of the Commercial Code. That provision already uses those thresholds for the higher 30% ceiling on broad-based free-share awards; an award benefiting all employees may reach a 40% ceiling.^[1][4]

The amendment targets collective employee buyouts in which employees contribute free shares to a common holding company. Its explanatory statement says the present rules can trigger tax on the acquisition gain even though the employees receive no cash. The proposal would defer that charge rather than exempt the gain: taxation would still follow when the employee later realises value under Article 80 quaterdecies.^[1][3]

Practical consequence remains contingent

Groups considering French employee-ownership or succession transactions should model both workforce tests and the existing ownership conditions, but should not implement the proposed treatment yet. The wording must survive the remaining National Assembly and Senate stages and final enactment. Amendment I-3652 states no separate commencement rule, so the final Finance Act and any transitional provision will determine when an expanded route can be used.^[1][2][3][4]