J'ai fait appel à Maître Uzan dans le cadre d'une procédure fiscale longue et techniquement complexe. Analyse rigoureuse du dossier, réponses précises dans des délais parfois très courts, et surtout une vraie capacité à maintenir un dialogue constructif avec l'administration plutôt qu'à durcir inutilement les positions.
Il a pris le temps de m'expliquer chaque étape et les options possibles, sans jargon et sans promesses excessives. Le dossier s'est conclu par une issue négociée.
Un accompagnement sérieux, du premier échange jusqu'au suivi complet de l'exécution. Je recommande sans réserve.
Foreign RSUs, Stock Options, etc.
By Marc Uzan, French tax lawyer in Paris
Foreign RSUs, Stock Options and Free Shares: Taxation in France
Tax lawyer at the Paris Bar since 2008 – exclusive tax law practice, including international employee share plans
Summary
- Types of plans: RSUs and free shares (AGA, French General Tax Code (CGI), article 80 quaterdecies), stock options (SO, CGI, article 80 bis), ESPP plans and phantom shares treated as salary.
- Timing of taxation: for RSUs / free shares, the acquisition gain is in principle taxed in the year of sale for a qualified plan, and in the year of final acquisition (vesting) for a non-qualified plan; for stock options, the exercise gain and then the capital gain on sale are taxed under specific rules.
- Taxes in France: income tax and social levies or contributions, under rules that vary with the type of plan (qualified or not) and its grant date; a specific 10% employee contribution may be due; the fraction of the gain linked to an activity carried out outside France may, depending on the treaty, not be taxable in France (allocation pro rata to working days).
- Role of the tax lawyer: securing the France/abroad allocation, applying the tax credit provided for by the treaty, discussing reassessments and advising on your taxation in France.
Exactly which instruments are covered by the term "foreign RSUs, stock options and free shares"?
- RSUs / free shares (AGA): free allocation of shares of a foreign company, acquired after a “vesting” period. The acquisition gain in principle corresponds to the market value on the date of final acquisition, less any price paid (often nil). Where the employee has worked in several countries between grant and acquisition, the gain may, depending on the treaties and the administrative guidelines, be allocated pro rata.
- Stock options (SO): right to buy a share at a price set in advance. The French regime distinguishes the exercise gain (taxed as salary) and the capital gain on sale (gain on securities). Plans of foreign companies may fall under article 80 bis of the CGI if they meet the conditions of French law; otherwise, the gain is in principle taxed as salary.
- International group plans: free or performance shares granted by a foreign parent company to the employees of its French subsidiary in principle follow the same rules (qualified plan or not); the fraction of the gain linked to the activity carried out in France is in principle taxable in France.
- Phantom shares and ESPP: plans paying a cash amount (phantom shares) are in principle taxed as salary at settlement; for an ESPP, the discount is in principle taxed as salary when the shares are purchased, then any capital gain when they are sold.
How are free shares (RSUs) granted by a foreign company taxed in France?
| Stage | Taxable event | Taxable base | Return section | Specific features |
|---|---|---|---|---|
| Acquisition gain – qualified plan | Sale of the shares: the gain is taxed in the year of the sale | Value of the shares on the date of definitive acquisition (vesting) - any price paid (often 0) | Form 2042 C for the year of the sale, "gains d'acquisition d'actions gratuites" (free share acquisition gains) section | Up to €300,000: progressive scale after a 50% allowance (plans authorized since 2018) and 18.6% social levies; above that: taxed as salary. Pro-rata ("day-count") if the employee worked outside France during the vesting period. |
| Acquisition gain – non-qualified plan | Definitive acquisition (vesting): the gain is taxed in the year of vesting | Market value on the vesting date - any price paid (often 0) | With salaries, for the year of vesting | Taxed as salary (progressive scale and levies on earned income). Pro-rata ("day-count") if the employee worked outside France during the vesting period. |
| Subsequent sale (capital gain) | Date of sale | Sale price - value on the date of definitive acquisition | Form 2074, transferred to form 2042 C (box 3VG) | Capital gain subject to the flat tax (PFU) of 31.4% (12.8% income tax + 18.6% social levies) or, by option, to the progressive scale. |
What is the French tax regime for gains on the exercise of foreign stock options?
- Exercise gain: the difference between the value of the share on the day of exercise and the exercise price is in principle taxed as salary, under the progressive scale of income tax; depending on whether the plan is qualified or not, the timing of taxation and the applicable social levies or contributions differ.
- Specific 10% employee contribution: it may be due on certain gains from qualified plans (article L. 137-14 of the French Social Security Code); it is in principle reported in box 3VN of return 2042 C.
- Separate capital gain on sale: when the shares are resold, the difference between the sale price and the value used for the exercise gain is in principle taxed at the 31.4% PFU (12.8% income tax + 18.6% social levies) or, on a global option, under the progressive scale.
- Activity abroad and tax credit: depending on the treaty, the fraction of the gain linked to the activity carried out abroad gives entitlement to a tax credit in France or is not taxable there; a table detailing the working days of each period may be useful to justify the allocation key.
How do you report an RSU acquisition gain or a gain on the exercise of foreign options?
- Activating the appropriate sections: in the online form 2042, the section relating to employee shareholding gains is in principle to be selected in order to display the specific boxes.
- Accurate reporting of amounts: depending on the type of plan and its grant date, the gain is in principle reported in different boxes (for example 1TZ for the acquisition gain on free shares under the regime resulting from the Macron law, after allowances, or 1TT/1UT for gains taxed as salaries); depending on the case, the 10% employee contribution may also have to be reported. It is advisable to have these boxes checked by your lawyer.
- Concurrent reporting of capital gains: if you resell all or part of the shares in the same year, the capital gain is in principle reported on schedule 2074 (or in the simplified "Plus-values mobilières" (capital gains on securities) section), in principle using the acquisition value reported as wages & salaries as the cost price.
- Supporting documents: it is useful to keep the employer's certificate, the brokerage statement certifying the valuation, the "day-count" table and, where applicable, the foreign tax assessments; the tax authorities may request these documents during the reassessment period (in principle until the end of the third year following the year of taxation, French Tax Procedure Code (LPF), article L169).
- Subsequent correction: in the event of an allocation error or omission, it is advisable to contact your lawyer first to determine the most appropriate course of action; depending on the case, an amended return may be filed before the reassessment period (in principle three years) expires, and taking the initiative spontaneously can help demonstrate your good faith.
For share purchase plans (ESPPs), in which employees buy their shares themselves at a discount, see the guide ESPP: how France taxes your foreign employer’s share purchase plan, with a worked example.
How can double taxation of an employee shareholding gain earned partly abroad be avoided?
- Prior analysis of the bilateral treaty: as a rule, treaties attach the gain to the State where the activity is carried out; some (for example with the United States or the United Kingdom) contain provisions specific to share plans. It is advisable to identify, with your lawyer, the applicable article before allocating the gain.
- "Day-count" pro-rata method: the ratio of days worked in France to the total number of days between the grant and the acquisition (or exercise) is in principle applied to the value of the gain to determine the portion taxable in France; a table signed by the employer may be useful.
- Crediting the foreign withholding: the amount of the income concerned (not the amount of tax paid outside France) is in principle entered on line 8TK. The tax credit is capped at the amount of French income tax on the portion of the gain relating to the foreign activity.
- Careful retention of supporting documents: it is useful to keep payslips, brokerage statements, foreign tax certificates, plane tickets and assignment orders.
What I see in my cases
The RSU, stock option and free share cases I handle almost always involve very high stakes. Here is what I see most often.
- Upstream errors at the employer. Transactions are rarely handled properly at employer level: plans are sometimes poorly structured, and payroll steps in France are not always carried out. Part of my work is to correct these errors intelligently, without creating a tax problem.
- International mobility. When the employee has worked in several countries during the vesting period, which is common, the whole point is to remove from the French tax base the portions of RSUs or stock options that are not taxable in France. Here too, the amounts at stake are very large.
- Qualified plans with several regimes. When the plan is qualified, several regimes may coexist: each grant of RSUs or stock options needs to be analysed separately.
- Possible optimisations. Many lawful optimisations exist, for example linked to how long the shares are held.
- Crystal-clear returns. The tax authorities know these mechanisms poorly: I make sure returns are crystal clear, to limit their questions.
Ultimately, the difficulty is not entering figures in boxes: it is making sure the situation has been optimised as far as possible, and being ready, if the tax authorities ask questions, to give solid, simple and clear answers. As every plan and every career path is different, a case-by-case analysis remains necessary.
The employers concerned are mainly large tech companies, American and British, and a few companies from European Union countries. The most frequent payroll error is to overlook non-qualified plans entirely: nothing has been taken into account in payroll, and the situation then has to be put right. On the employee’s side, the most common error is applying the qualified-plan regime to a plan that is not qualified. In the event of mobility, the gain is split according to the part of the vesting period worked in France, with often complex judgement calls when teleworking or travel in several countries is also involved.
The tax authorities mainly ask for the bank statements relating to the sales, sometimes the plans themselves; in cases of international mobility especially, explanatory work is often necessary. In one case, a client had moved to Switzerland without reporting their departure to the French tax authorities. The tax authorities then sought to tax their Swiss stock options and RSUs in France, for very large amounts. Thanks to a solid file and precise arguments, nothing was ultimately upheld on these securities; only a limited correction of French rental income was maintained. This result stems from the facts of that case. Clients also sometimes consult me after losing a benefit following a reassessment: putting the situation right remains possible in some cases, not in all, hence the value of being advised from the outset.
There remains the question of whether to sell or keep the shares. It involves weighing the tax impact of a sale against the financial risk of holding securities whose price may fall, while they often represent a very large sum. Some prefer to limit this risk by selling quickly, in line with the saying “a bird in the hand is worth two in the bush”; it is a personal decision, which benefits from being made after an analysis of the situation.
Why entrust your foreign RSUs / stock options to a tax lawyer?
- Timing and method of taxation: the lawyer compares several scenarios (timing of sales, choice between PFU and the progressive scale, offsetting of capital losses) according to the applicable rules.
- Treaty security: they draft a reasoned memo, based on the text of the treaty, to justify the allocation of working days before the tax authorities; this anticipation may help rule out a surcharge for deliberate failure.
- Disputes and penalties: in the event of a reassessment, the lawyer structures the reply, discusses the adjustments and penalties and, if necessary, brings the case before the administrative court.
- Estate planning: depending on the case, the lawyer analyses the French tax consequences of a gift, of a departure abroad (in particular with regard to the exit tax) or of other options.
FAQ
Why does France tax my foreign RSUs when the employer has already withheld tax?
The tax withheld at source abroad does not, in principle, discharge you from French tax when you are a French tax resident; treaties in principle provide for a tax credit (or an exemption) to avoid double taxation.
The portion corresponding to the days worked outside France may, depending on the treaty, not be taxable in France or give entitlement to a tax credit, provided that the allocation of days can be justified. Otherwise, the tax authorities may consider that the whole gain relates to the activity carried out in France.
How do you calculate the acquisition gain on a foreign RSU with several periods of expatriation?
In principle, the market value on the vesting date is determined, any purchase price (often nil) is deducted, and the result is multiplied by the fraction of working days performed in France between the grant date and the acquisition date.
Days of leave relating to a French contract are in principle included; non-working days abroad are in principle allocated pro rata. It is useful to document the calculation with a precise table and proof of presence (contracts, visas, tickets).
What should I do if I forgot to report a gain on the exercise of stock options?
It is advisable to contact your lawyer first, in order to determine with them the most appropriate courses of action for your situation. In some cases, it may be appropriate to file an amended return 2042 + 2074 for the year concerned and to pay the tax due with late-payment interest; in other situations, a different approach may be preferable.
In principle, the exercise gain is reported on line 1TT (1UT for the second filer) and the 10% employee contribution on line 3VN, applying, where appropriate, the "day-count" allocation for periods worked outside France. This correction remains possible until the reassessment period expires (in principle the end of the third year following the year of taxation); taking the initiative spontaneously, before any audit, may demonstrate your good faith and limit the risk of a 40% surcharge for deliberate failure.
Glossary & checklist
Vesting: The date on which your RSUs become definitively acquired.
Acquisition gain: Market value of the shares – price paid (often 0).
10% contribution: specific employee contribution that may apply to certain gains from qualified plans.
PFU: Prélèvement Forfaitaire Unique (single flat-rate levy): 12.8% income tax + 18.6% social levies.
Checklist: "5 steps to report"
□ Vesting or exercise date identified
□ Gain calculated, with the France/abroad allocation
□ Return boxes checked (for example 1TZ, 1TT, 3VN, 2074)
□ Tax credit provided for by the treaty, where applicable
□ Agreement, statements and table allocating working days kept
Further reading
- Article 80 bis of the CGI: stock option regime.
- Article 80 quaterdecies of the CGI: taxation of free shares.
- BOI-RSA-ES-20-10-20-60: "day-count" pro-rata method.
