⚠️  The tax information below is an extremely brief summary for standard situations of the referred relationship, and each situation may of course be different from the norm and have its own specificities. ⚠️

A more comprehensive set of information for this country and work relationship is available on Easop.

If you’re looking for more detailed information in this country (or if you are just curious about our global compliance offering and pricing), get in touch with us and we’ll tell you more about it! 💡

BSPCE

If you have a local subsidiary in France and comply with the conditions for offering BSPCE, you should definitely consider offering stock options qualifying as BSPCE ("bons de souscription de parts de créateur d’entreprise"), which we’ll simply call “BSPCE”.  

Before making grants, you’ll need to set up a subplan to your main equity plan. It can be done in a matter of days with Easop, and it then allows you to make as many grants as you want, which are tax efficient both for you and your grantees!

In a nutshell, what does taxation look like?

• With BSPCE, you and your grantees won’t have to pay taxes or social security charges when the BSPCE are granted, when they vest, or when they are exercised. It’s only when the shares are eventually sold that the grantee will have to pay taxes.

• There are certain formalities at the time of exercise, which Easop can take care of.

• If the grantee stays for 3 years with the company, taxation will be even more favorable, a good incentive for them to stay longer!

If you have contractors or advisors in France, you won’t be able to incentivize them with BSPCE.

NSO

✅ You can definitely also grant non-qualified stock options (NSO) to employees in France.

Please note that France has various tax-favored equity incentives that are available for foreign companies too, such as BSPCE ("bons de souscription de parts de créateur d’entreprise"), French qualified “stock options” or “free shares” ("actions gratuites"). These equity incentives are available under certain conditions and require the adoption of a subplan to the main equity plan, which requires a bit of legal work.

‍The below is in case these tax-favored schemes are not applicable to your employees in France.

‍In a nutshell, what does taxation look like?

• At grant 👉 No taxation.
  
  
• At exercise 👉 The spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) is taxed as salary income.
  
  
• At sale 👉 Once the grantee sells the shares, they will be taxed on the sale gain.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

✅ You can definitely grant non-qualified stock options (NSO) to local residents employed via EoR in France!

France has various tax-favored equity incentives that are available for foreign companies too, such as BSPCE (bons de souscription de parts de créateur d’entreprise), French qualified “stock options” or actions gratuites. Unfortunately, none of these equity incentives is available for employees employed via an Employer of Record (EoR).

‍In a nutshell, what does taxation look like?

• At grant 👉 No taxation.
  
  
• At exercise 👉 The spread (i.e. the difference between the fair market value of the shares at the time of exercise and the exercise price paid by the grantee) is taxed as salary income.
  
  
• At sale 👉 Once the grantee sells the shares, they will be taxed on the sale gain.

💡 A way to reduce taxation for the grantee would be to allow the grantee to “early exercise” the stock options (i.e. exercising stock options that have not vested yet) but early exercises are not always easy to manage from the company’s perspective and on the grantee's side it may increase the risks of paying an exercise price (and taxes thereon) on something which may happen to be eventually worth nothing later down the road.

NSO

✅ You can grant non-qualified stock options (NSOs) to French residents employed as contractors. There are no legal obstacles but the tax treatment of stock options offered to contractors is not clear.

‍In a nutshell, what does taxation look like?

Taxation could theoretically occur only at the time of sale (on the difference between the price at which the contractor sells their shares and the exercise price paid by the contractor to buy the shares) as a capital gain.

The problem is that the tax authorities may have the right to requalify the gains and treat them as either (i) employment income, or (ii) non-commercial business income or distributed income, depending on the nature of the business relationship between the grantee and the company.

Another easier, less risky and more flexible option to incentivize contractors in France could be granting Stock Appreciation Rights (SARs) instead of NSOs.