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This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.
 Participation
Interessement
PEE (Plan d’Epargne d’Entreprise)
PEA (Plan d’Epargne en Actions)
Compte d’Epargne Temps (CET)
 Participation
Companies employing more than 50 people are required to share part of the yearly profits with the employees. If the beneficiary keeps the profit in the company profit sharing plan, it will be tax free after 5 years. Social taxes are not applicable.
However CSG and CRDS are due on 95% of the gross amount.
Companies which “Participation” agreement provides for a payment higher than the legal amount may book a reserve for investment.
State owned companies
French supreme Court ruled that subsidiaries of state owned companies (More that 50% of the equity owned directly or indirectly by the French state) incorporated as a company and having a business activity are liable of the “Participation” (Legal share of the profit allocated to the employees) when they have at least 50 employees. In addition, and as of January 1st, 2006, State owned businesses not receiving public subsidies, not benefiting of a monopoly or not subject to State regulated prices, will be liable of the “Participation” without having to receive or request a Government approval.
IMPORTANT: Employees may receive directly their 2005 « Participation » or request its immediate release when the funds were already allocated (Conditions apply). These payments are exempted of social taxes but remain taxable in the hand of the employees. Pension plan (PERCO) cannot benefit of this provision.
Interessement
Until December 31, 2005, all companies having or not concluded an “Interesssement agreement” (Profit sharing agreement), have the right, when they fulfil the applicable legal conditions, to distribute a share of their 2004 fiscal year profit. This exceptional premium is tax deductible for the employer and is not subject to social taxes. However CSG and CRDS apply.
Chairmen, general managers, spouse of business managers acting as partner or employee may now benefit of an “interessement agreement” if the headcount of the company or the business is between 1 and 100, manager and sole shareholder of his own company excluded (Conditions apply).
PEE (Plan d’Epargne d’Entreprise)
When employer pays a bonus to employees accepting to keep the company profit share on the company profit sharing plan for 5 years, the tax rules applicable to the company profit sharing plan also apply to the bonus.
However the 2% social surcharge is due. Earnings generated by company profit sharing plans are not taxable if automatically reinvested in a Company saving plan "PEE". CSG, CRDS and 2% social surcharge. To know more about this subject check "Social charges" apply.
Sum invested in company saving plan " PEE " can be used tax free to exercise stock options if the shares remains in the plan for an additional 5 years period.
PEE is often a very efficient tax tool.
IMPORTANT: When shares of non listed companies are transferred to PEE or PEA (Saving plans exempt of capital gain tax), it is important to do it at market value to avoid that the French revenue considers that the use of a PEA or a PEE is an abuse of law (80% penalty).
Compte d’Epargne Temps (CET)
Companies may implement a Compte Epargne Temps « CET » to allow their employees to accumulate income tax exempt savings. Earnings from “Interessement” and “Participation” when available may be allocated to a CET. Normally these earnings are subject to CSG and CRDS but are exempted from social taxes. However when transferred to a CET, savings related to “Interessement” and “Participation” will become subject to social taxes and taxes on salaries. Companies contemplating the implementation of a CET should carefully weight the additional cost related to the possibility of transferring money from “Interessement” and “Participation” to CET before authorizing it.
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