Taxation of Shares
The following information regarding the tax treatment of dividends, capital gains on disposals of securities, the solidarity tax on wealth, and the tax on financial transactions refers to current tax arrangements. These provisions are general in nature, are provided purely for the purposes of illustration on the date of publication, and may be modified as a result of regulatory changes. Any new tax measure may have an impact on your personal situation if you are subject to the tax rules detailed in this communication. Shareholders are advised to refer to the tax authorities or to consult their usual tax adviser for any additional information specific to their own situation.
ENGIE gives no commitment regarding the veracity, accuracy or completeness of the information provided, and accepts no liability whatsoever for any consequences arising as a result of the use made by shareholders of this information.
ENGIE accepts no liability whatsoever for any loss or prejudice that may result directly or indirectly from the content of this communication or the use made of it.
This update takes account of the principal tax impacts of the 2014 French Finance Law adopted by the French Parliament on December 19, 2013, the 2013 Amending Finance Law and the 2014 Social Security Finance Law. The broad lines of these provisions are set out in the January 2014 Newsletter published by Société Générale Securities Services, which is appointed by ENGIE to manage its registered shares (download it here in French).
Shares may generate two types of gain:
- Dividends: a share of profit distributed to shareholders on the basis of the company’s financial results
- Capital gains: the difference between the price at which you purchase your shares and the price you receive when you sell them, assuming that you sell them for more than you paid for them (where the reverse is true, the term ‘capital loss’ is used)
Only dividends and capital gains are relevant for the calculation of income tax. Under current French legislation, the holding of shares is not itself taxed, and holdings do not need to be declared (this is not the case for wealth tax: see below).
How is domiciliation for tax purposes defined in France?
French tax regulations apply the following alternative criteria in order to define whether a person is considered as domiciled for tax purposes in France:
- Whether the person concerned has his/her home or principal residence in France: the concept of home means the place where he/she normally lives and is the center of his/her family interests
- Whether the person concerned carries out a professional activity in France, whether salaried or otherwise, unless this activity can be shown to be secondary
- Whether the person concerned has his/her financial interests centered in France, has made his/her principle investments in France, has his/her business headquarters in France, or administers his/her assets in France
Only one of these criteria needs to be met for the person concerned to be considered as domiciled for tax purposes in France.
THE 2014 FINANCE LAW
INDIVIDUAL SHAREHOLDERS RESIDENT IN FRANCE FOR TAX PURPOSES
Taxation of dividends (excluding PEA)
Dividends are subject to the progressive income tax scale following application of a 40% proportional rebate. The gross amount of dividends is subject to 15.5% social security charges, deducted at source by employers.
The mandatory withholding tax of 21% levied as an advance income tax payment applies to the gross amount of dividends received. This advance payment is offset against income tax liability for the following year.
Exception: Households whose reference taxable income was below €50,000 (for those taxed individually) or €75,000 (for couples taxed jointly) in the year before the year preceding that in which tax is paid may request exemption. To do this, they must submit a request via their financial intermediary no later than November 30 of the year preceding the year in which dividend payments were made (a template suitable for use by fully registered shareholders may be downloaded from Sharinbox).
Taxation of capital gains
Capital gains made on the disposal of securities are taxed on the basis of the progressive income tax scale, following application of a rebate, the amount of which varies depending on the length of time the shares concerned have been held.
The general tax treatment is based on a rebate of 50% where shares have been held for between two and eight years, rising to 65% thereafter. This treatment also applies to disposals of stocks or shares in collective investment funds, where these funds are at least 75% invested in company stocks or shares.
Less than 2 years
More than 2 years and less than 8 years
More than 8 years
The retention period begins on the date of subscription for, or acquisition of, the stocks, shares, allocated shares or securities, and ends on the date of ownership transfer.
Capital losses remain deductible only against capital gains of similar type made in the year of disposal or within the following ten years.
Social security charges levied at 15.5% on January 1, 2013 remain payable.
IMPORTANT: in a notice issued on July 10, 2013, the French tax authorities reminded financial institutions that the securities retention period must be calculated by the taxpayer, who is personally responsible for its accuracy.
Special treatment of PEA
ENGIE shares are eligible for inclusion in a PEA. The maximum PEA investment is €150,000 for individuals and €300,000 for couples.
Subject to certain conditions, the PEA offers the following benefits:
During the term of the PEA, exemption from the income tax and social security charge liability on any net income and net capital gains generated by investments in the PEA, provided that the income and capital gains concerned remain inside the PEA.
On closure of the PEA (where this occurs more than five years after the date the PEA was opened) or when a partial withdrawal is made (where this occurs more than eight years after the date the PEA was opened), exemption from income tax on the net gain made since the plan was begun Nevertheless, the income and/or capital gains concerned remain subject to social security charges at the rate effective on the date the gain is realized.
Income received from a PEA since the tax point for the 2010 results no longer qualifies for the 50% dividend tax credit capped at €115 or €230 (depending on the family status of the recipient), because this tax credit has been abolished across the board.
In principle, capital losses on shares held in a PEA may be offset only against capital gains earned within the same plan. However, where the PEA is closed early before the end of the 5th year (or after January 1, 2005, where a PEA is closed after the 5th year), any capital losses incurred may, subject to certain conditions, be offset against gains of the same nature earned outside of the plan (on an ordinary share account) during the year in which the plan is closed or within the following ten years.
Where a PEA is closed before the end of the five-year period, the dividends and capital gains earned will be taxed at the following rates (from the first euro of disposals made after January 1, 2011):
|Taxation of PEA-related dividends and capital gains|
|Social security charges|
General welfare contribution
Social security charge
Social debt repayment contribution
|Less than 2 years||8.20%||4.50%||2%||0.50%||0.30%||22.50% ||38.00%|
|More than 5 years||8.20%||4.50%||2%||0.50%||0.30%||-||15.50%|
Since March 20, 2012, the transfer by a shareholder of his/her domicile abroad for tax purposes no longer results in automatic closure of the PEA.
The 2014 Finance Law introduced a new ‘PEA-PME’ for shares in listed and unlisted Small and Midsize Enterprises (PMEs in French), as well as Intermediate Enterprises (ETI). The upper limit for investment in these plans is €75,000 for individuals and €150,000 for couples.
The PEA-PME attracts the same tax benefits as the ‘classic’ PEA and operates in exactly the same way. The types of share eligible for inclusion in this type of PEA are shares and other securities issued by European ETIs and shares or units in UCITS. Taxpayers may hold both a ‘classic’ PEA and a ‘PEA-PME’.
Wealth tax (ISF)
Shares held by individuals as part of their private assets will be included in their total taxable assets and, where applicable, incorporated in wealth tax [Impôt de Solidarité sur la Fortune or ISF] computations. In this context, taxpayers may declare their shareholdings either at their closing stock market valuation on December 31, 2013 or at the average stock market value for the last 30 trading days of the calendar year.
The ENGIE share prices to be declared
Closing market value on 12/31/2014
Average market value for the last 30 trading days of 2014
You are liable to pay French Wealth Tax (ISF) if you owned at least €1.3 million in net taxable assets on January 1, 2013.
Your tax declaration obligations differ depending on the amount of your net taxable assets:
- if your net taxable assets total more than €1.3 million and less than €2.57 million, you no longer have to submit a specific ISF return, but should declare your assets for ISF purposes as part of your income tax return (using form 2042 C), with no need for supporting documentation
- if your net taxable assets total €2.57 million or more, you should submit a normal or simplified 2725 ISF declaration, together with all supporting documentation
The 2013 finance law introduced a new wealth tax (ISF) reform, raising the tax rate and revising the tax ceiling.
From 2013 onwards, ISF liability is calculated using a 6-step progressive scale from 0.5% to 1.5%. The tax threshold is €1,300,000.
Fraction of net taxable wealth
Applicable rate (%)
|€800,000 or less||0|
|More than €800,000 up to and including €1,300,000||0.50|
|More than €1,300,000 up to and including €2,570,000||0.70|
|More than €2,570,000 up to and including €5,000,000||1|
|More than €5,000,000 up to and including €10,000,000||1.25|
|More than €10,000,000||1.50|
Introduction of a super-tax on the highest salaries
The 2014 Finance Law introduced a 50% super-tax rate payable by employers on the highest levels of salaries and associated benefits, which specifically include stock options, free shares and stock options in start-up companies.
This tax is levied on compensation in excess of €1 million paid or allocated in 2013 and 2014.
Appendix #1: Summary of key tax measures for 2013
- Removal of the flat-rate withholding tax option for income after January 1, 2013
- Removal of the fixed annual rebate of €1,525 or €3,050 on dividends (depending on taxpayer family status) with retrospective effect from January 1, 2012
- Introduction of mandatory advance income tax payment charged at 21% and withheld at source with effect from January 1, 2013
- Partial deductibility of CSG
The partial deductibility rate for the general social contribution (Contribution Sociale Généralisée or CSG) on income from capital taxed under the progressive income tax scale was reduced from 5.8% to 5.1%
Appendix #2: Tax on financial transactions
Effective from August 1, 2012, the 1st amending finance law for 2012 introduced the obligation for financial intermediaries (brokers or account holders) to apply a 0.2% tax on the acquisition value of capital securities traded in a regulated French, European or foreign market and issued by companies with French registered offices and market capitalization of over €1 billion in January 1 of the tax year.
Except where a legal exemption applies, this tax on financial transactions applies solely to securities acquisitions.
Acquisitions of new securities issued as part of a capital increase transaction are covered by the scope of this tax, but may nevertheless be exempt under the terms of the law.
Appendix #3: Revision of the progressive income tax scale
After 2 consecutive years of no change in the progressive income tax scale during 2011 and 2012, the limits for all progressive income tax scale bands were adjusted by 0.8% for 2013. This scale applies from the 2013 tax year onwards. The limits for all progressive income tax scale bands have therefore changed.
Fraction of taxable income
From €6,011 to €11,991
From €11,991 to €26,631
From €26,631 to €71,397
From €71,397 to €151,200
SHAREHOLDERS NON-RESIDENT IN FRANCE FOR TAX PURPOSES (excluding Belgium)
Taxation of dividends
Where the shareholder’s domicile for tax purposes or the registered office of the effective beneficiary is located outside of France1, dividends distributed by ENGIE are, in principle, subject to a 30% withholding tax deducted on the payment date by the dividend-paying institution.
However, this deduction at source may be reduced (usually by 15%) or negated under the terms of international tax treaties signed by France. Shareholders non-resident for tax purposes receiving dividends from a French source may request the option to receive a direct payment at the rate applied under the terms of the tax treaty between France and their country of residence, in accordance with BOI-RPPM-RCM-30-30-10-20120912.
Shareholders must also provide an original copy of tax residence declaration 5000, duly completed and certified by themselves and by the Tax Authorities in their country of residence.
This ‘simplified’ procedure provides for the issue, prior to payment of the dividend, of a certificate valid for a full year: the calendar year in which the declaration is issued by the foreign tax authority concerned.
Where these formalities are not observed, the 30% withholding tax will be applied to the dividends (under Article 119 bis II of the General Tax Code). Shareholders will then have to use the ‘standard’ tax refund procedure.
Shareholders must then submit the standard refund forms (tax residency certificate 5000 + the ‘Calculation of withholding tax on dividends’ form 5001 (both are available online in six languages at www.impots.gouv.fr) to obtain a refund of the difference between withholding tax rates, subject to the necessary procedures being completed within the general time limit of 2 years (Article R-196-1 of the French Code of Tax Procedures).
1A 75% withholding tax rate is applied to interest and dividends paid in a Non-Cooperating State or Territory (Etat ou Territoire Non Coopératif or ETNC). The withholding rate increase applies to income received or capital gains earned from January 1, 2013.
*List of ETNCs at January 1, 2014: Botswana, Brunei, Guatemala, the Marshall Islands, the British Virgin Isles, Montserrat, Nauru and Niue.
Taxation of capital gains
Subject to the provisions of any international tax treaties that may apply, the capital gains earned when persons not domiciled in France within the meaning of Article 4B of the General Tax Code dispose of their shares are not generally subject to French taxation (see above for the definition of French tax residency).
Please note that the gross amounts of share disposals are declared to the French General Office of Public Finance.
Wealth tax (ISF)
Individuals non-resident in France for tax purposes within the meaning of Article 4B of the General Tax Code, as defined above, are not subject to French wealth tax in respect of their financial investments.
However, equities are not treated as financial investments, and are therefore potentially subject to the wealth tax, subject to the provisions of international tax treaties.
Breakdown of current social security charges
- The 8.2% General Social Contribution (CSG), 5.1 points of which are deductible from the total taxable income in the year of payment
- The 4.5% social charge on capital revenue, which is not deductible from basic income tax
- The 2% solidarity charge
- The 0.5% social debt repayment contribution (CRDS), which is not deductible from basic income tax
- The 0.3% additional contribution
Social debt repayment contribution