For tax qualified free share awards granted under a free share plan authorised between October 2007 and the introduction of the “Macron law” in August 2015, the employer social contribution is due in the month following grant. If the award, or part of the award, does not vest, the employer was not entitled to claim a refund of the social contribution.
What does the Constitutional court decision say?
The court (in a decision released on 28 April) held that although it is acceptable for the employer to be required to pay the social contribution on grant of the award, the inability to claim a refund when the award does not vest is not constitutional. As a result, it may now be possible for employers to claim a refund from the French social administration (URSSAF) of employer social contributions paid in relation to an award, or part of an award, which has not vested. Limitation periods apply to claims for reimbursement of payments made to the URSSAF which may limit the ability of an employer to make a claim as a result of the court’s decision.
Does this affect ‘Macron’ share plans?
The decision does not affect “Macron” tax-qualified free share awards, which are awards authorised under the more favourable tax regime introduced in August 2015, as employer social contributions under the Macron regime are not due until within the month following vesting of awards. As such, there would be no employer social contribution due in relation to a Macron award if it failed to vest.
What should companies do?
Companies seeking to apply for a refund will need to act quickly. They should review any employer social contributions they have previously paid on tax-qualified free share awards at grant, including in order to determine the amounts and times of payment, and consider whether they may be eligible for a refund. If you want to find out if you might be eligible, please contact us and we can advise on the requirements (the details of which are still unclear). Should you be eligible, we can also help you with the process for claiming the refund from the URSSAF.
Going forward, companies should put in place systems to monitor the employer social contributions paid at grant and track whether those shares subsequently vest or lapse, so that they do not miss out on opportunities to claim a refund where the employee does not actually end up receiving the shares.
Is there anything else to think about in France?
As no doubt you are aware, Emmanuel Macron has recently been elected as the new President of France.
The tax-qualified regime for free share awards which bears his name was introduced by Mr Macron while he was the Economy Minister for France. Following his departure from the government, the Macron free share award regime was watered down at the end of 2016 to reduce the tax benefits (see our newsletter on this here). However, it is not expected that he will seek to introduce further changes to this regime in the coming months.
This is welcome news. It has long been considered unfair that companies can incur this cost where the employee does not end up receiving an actual benefit. The Macron law sought to remedy this (by moving the time of payment of employer social contributions from grant to vesting) but this did not affect awards granted under free share plans authorised prior to the regime’s introduction.
Certain evidence will need to be produced to the URSSAF in order to successfully claim a refund, so it is important companies get specialist advice on the URSSAF’s requirements. Nevertheless, the process could be worthwhile, particularly where significant amounts are involved.
If you have any questions, please do contact us – we would be delighted to help!
Bob and Emma