4.3 2014-equity compensation in france is still alive.ppt · 2014: equity compensation in france is...
TRANSCRIPT
2014: Equity compensationin France is still alive
Laurent Drouin, Head of Sales, RM, Marketing and Product Development, CACEIS Corporate Trust Nathalie Hellio, EALEA Director, Accenture
Didier Hoff, Head of Human Capital, EY Société d'avocatsChristina Melady, Partner, Taj Société d'avocats, Member of Deloitte Touche Tohmatsu Ltd
Agenda• Introduction• Equity compensation in France• Equity compensation worldwide• Statistics• Take away• Questions
Enhancing the Global Rewards offers
Legal network –vision from Taj
French qualified vs non-qualified awards: tax treatment from 2008 to 2014
TAX TREATMENT FOR THE BENEFICIARY
taxation in 2008
taxation in 2011 taxation in 2012new grant in
2014taxation in
2008taxation in
2011taxation in 2012 taxation in 2014
Income tax (marginal) 30% 30% 30% up to 45% up to 40% up to 41% up to 45% up to 45%
Employee social security contributions
0% 0% 0% 0% 8,85 to 25% 8,85 to 25% 8,85 to 25% 9 to 25%
Employee contribution * 0% 8% 10% 10% N/A N/A N/A N/A
Social taxes 11% 13,5% 15,5% 8% N/A N/A N/A N/A
Overall tax rate 41% 51,5% 55,5% up to 63% around 50% around 50% around 55% around 55%
EMPLOYER COSTS taxation in
2008taxation in 2011 taxation in 2012
new grant in 2014
taxation in 2008
taxation in 2011
taxation in 2012 taxation in 2014
Employer contribution due at grant
10% 14% 30% 30% N/A N/A N/A N/A
Employer social security contributions due at the date of payment
N/A N/A N/A N/A 25 to 45% 25 to 45% 25 to 45% 25 to 45%
* for free shares granted as from October 16, 2007
Gain of €100 000 Free shares granted under a French qualified plan
Gain of €100 000 Compensation income (non‐qualified plan)
As of September 28th, 2012
Qualified plan+ _
Employee
• Possibility to keep all shares as co-investment before tax, i.e. tax deferral until the sale of shares – pretax investment
• Future capital losses tax deductible from the acquisition gain
Employer
• The costs are generally lower, depending on level of compensation
• Possibility to minimize the 30% employer contribution due at grant by using IFRS2 value
• Severance payment, incentive and profit sharing purposes are not taken into account
Employee
• 2 years holding period (not applicable if acquisition period is equal or more than 4 years) – longer period than global plan
• No counterpart in social benefits
Employer
• Constraints in plan design• Numerous French specific reporting requirements• 30% employer contribution due at grant, with no possibility of
reimbursement – costs incurred irrespective of whether shares will effectively be delivered
• Where holding periods or reporting requirements are not respected, ordinary social charges are due by the employer. Employer must bear employee charges. This situation significantly increases costs: 30% contribution + employers social + employee social
Non-qualified plan+ _
Employee
• No minimum vesting and holding period – opportunity to receive and sell shares earlier
• Counterpart in benefits of employee social charges paid
Employer
• Flexibility for plan design• Social charges (at delivery) only applicable if a gain is
realized• Reporting requirements limited to year of vesting – same
as ordinary payroll
Employee
• Payment of taxes upon delivery of the shares (vs. sale of shares)• Market expectation is still a qualified plan• Future capital losses non-deductible
Employer
• Employer costs (social charges) generally higher• Taken into account for severance payment, incentive and profit
sharing purposes• Withholding may generate processing difficulties in the French
company
Accenture equities plan - overview• IPO in 2001 – SIP implementation for 10 years, reviewed in 2010• ESPP for all employees below MD and VEIP for MD (democratic plans)• Stock option plan – stop granting in 2005 (10 years)• RSU performance plan for SM and MD (3 years vesting)• RSU celebratory plan for promotion to MD or experienced MD hired (cliff vest year 5) • French subplan for qualified stock options• French subplan for qualified RSU implemented in 2005 and stopped in 2012 (except for
RSU dividend equivalent attached to previous qualified RSU)• Value of ACN share:• at IPO: $14.5• Current: $80• Listed on NYSE (granted by Ireland plc – holding company)
Living with qualified and not qualified equity plans in France
• The decision to stop granting RSU under the French subplan was mainly driven by cost/tax reasons both from an employee and employer standpoint:
– Beneficiaries are SM and MD at a level of income that was rendering the qualified taxation less favorable than taxation as salary
– Turnover is quite high in our consulting/technology services industry and the « 30% » social tax is paid even if the beneficiary does not receive the shares
• It was decided to continue to grant RSU but under the global plan which:– Avoids the requirement to customize the plans for French beneficiaries
• Engages the employee (3 or 5 years of vesting) and drives a shareholder mentality• ACN distributes dividends twice a year with a constant increase ($1 in Nov)• MD have an Equity Ownership Requirement (multiple of salary in equity)
– Accenture & employees in France have to deal with administrative complexities of qualified stock options, qualified RSU and non qualified RSU
Living with qualified and not qualified equity plans in France• Complexity for the employee that can benefit from the 3 different plans
– Accenture communicates on taxation (myHolding tool, equity guides, link to a tax tool, annual guide for tax compliance prep)
• Complexity for the company:– Differentiate with broker qualified vs non qualified to ensure holding periods are respected
– Reporting requirements are complex for qualified:• Payroll to pay the « 30% social taxes at grant » • Annual report for exercised stock options and released RSU included in N4DS• Annual report for RSU qualified grants (remains for the qualified RSU div equivalent) included in N4DS• Individual statements for exercised options & delivered RSU
– Cross border employees generate complexity• Annual reports require since 2012 the sourcing of income to France• At sale, French NR are subject to WT (broker obligation)• Difficulties to implement hypo tax • French NR are also subject to equity trailing liability (even for non qualified)
• Dividends received from a non French broker are subject to spontaneous tax return & advance payment
CACEIS Statistics from January 2009 to August 2014
Qualified plans are still alive
Source : Sep2014 Study on all Euronext Paris listed Clients of CACEIS
CACEIS Statistics from January 2009 to August 2014
Source : Sep2014 Study on all Euronext Paris listed Clients of CACEIS
CACEIS Statistics since January 1st 2014
Source : Sep2014 Study on all Euronext Paris listed Clients of CACEIS
Takeaway
Questions
Thank you
Laurent DrouinCACEIS Corporate Trust
Christina MeladyTaj - Société d'avocats
Nathalie HellioAccenture
Didier Hoff EY - Société d'avocats