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Offering Shares to Overseas Employees in France

What is an employee share scheme?

Offering an employee the opportunity to directly buy shares of the employer’s company is a frequently used incentive to engage the employee with company performance and earnings.  In turn, the employee is rewarded when share prices appreciate.  While this is relatively simple to offer inside the home country, it can be more complex when a company wants to offer shares to remote employees working abroad.

Many elements of the domestic share scheme may not be as advantageous or even permitted in the foreign country of employment, so there are some key factors to review before offering the remote employee to join.  When it comes to any form of compensation, benefits or taxation, the laws of the foreign country will be applied to the employee.

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Client Case: Things to consider before offering shares to overseas employees in France

We have a client in Australia who offers a share scheme to their Australian employees and now wanted to offer the same thing to a remote French employee.  We advised the client that it was legal to do so, but not recommended for several reasons:

  • How will employees pay for the shares

The Australian employees typically will take out a loan from the company to buy shares, so they don’t have to put up their own funds.  But that might be more difficult with a foreign employee who may need to pay for shares directly from savings.  The loan might be seen as a taxable benefit in France.

  • Share prices: public price or discount price

In Australia, employees can purchase shares at a discount rather than the public market price.  However, the French employee was hired by the employer of record in France and would not be entitled to the discount price, so they lose that advantage enjoyed by their Australian counterparts.

  • Taxes and exemptions

If shares were simply granted to the French employee, then that would be a taxable benefit and if sold within a year, any gain is also taxable.  Any exemptions may not be available within the time span of employment, and a new law means that tax withholding is now the responsibility of the employer.

  • Alternatives

Given these factors, there is no real benefit to the employee or company, and we advised the client to provide a bonus instead.  Of course, the employee could use the bonus to buy company shares through a broker just like any investor.

This is a good example of how differences in employment and tax laws between two countries can complicate hiring foreign employees, and how an employer will have to make special accommodations or arrangements to remain in compliance.

Do you need more information about France?

After reading about share schemes you might have more questions about France such as:

What other types of benefits and allowances are taxable to the employee?

Do the same tax rules and limits apply to expat employees in France?

These are the type of questions that we receive from our clients, in the areas of payroll, tax and employee benefits.  We make international employment simple.

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