LeXcom Law firm

The main characteristics of this tax, which is payable by French finance companies and investment institutions , are the following:

Beneficiaries of the bonuses

The tax applies on bonuses paid to employees who are financial markets professional « whose activities are likely to significantly influence the risk exposure of the company » and to the persons "under the control of which" the above defined employees perform their activities. The text does not mention the corporate officers but only employees meeting the above definition. The main issue will be to determine, for each company subject to the tax, the list of its employees falling into the scope of this particularly vague definition.

Basis of computation of the tax

The variable part of compensations referred to by the provisions of the Bill is defined as the gross amount of the compensation items paid to the abovementioned beneficiaries for their 2009 individual or collective results, including when the actual payment and vesting are conditional. Such variable part will be taken into account for the computation of the tax only for its portion exceeding EUR 27,500. Such compensation items are included in the basis of tax whatever the year of payment or of vesting would be. Consequently, as long as such compensation items would find, even partly, their source in activities performed in 2009, they will be subject to such tax, even in the event their actual payment would be deferred by one or several years. The only compensation items excluded from the scope of the Draft Bill would be the amounts paid with respect to legal compulsory and non-compulsory profit-sharing schemes, “Participation” and “Intéressement” (which are already subject to a 4% special tax, the “forfait social”).

Nature of the variable compensation items

The tax is computed to only on cash variable compensation items, but also on the ones granted through stock options, conditional share awards or any other share-based preferential awards. This tax applies even if the awards are granted by a foreign parent company or subsidiary. In case of grant of stock options or of conditional share awards, the tax is computed on the fair value of the options, shares or other securities, as defined for IFRS purposes (consolidated accounts). The computation basis is therefore identical as the one of the special employer’s contributions (for the above defined beneficiaries) payable on such awards by French employers. The tax is therefore likely in certain cases to be paid on compensation items which will never be actually paid out, in the event the applicable conditions provided for the vesting of the awards would not be met. Should this happen, the draft bill provides that no amount of tax shall be reimbursed.

Rate and payability date

The tax is due, at the rate of 50%, on the first day of the month following the grant decision. The tax will be declared and paid within twenty-five days of its payability date, using a form which will be issued by the French tax administration. The tax will be paid upon filing of the declaration. However, for bonuses paid before March 9, 2010, the tax will be payable as from April 1st, 2010, and before April 25, 2010.