France: Tax on Bank Bonuses Passed

Published in France’s Official Journal on 10 March 2010, Law No. 2010-237 introduces a one-time 50% tax on bonuses paid to bank traders during 2009. The tax is due on 1 April 2010.

Unlike the proposed version of the tax, which would have applied only to capital markets professionals whose activities were likely to have a substantial impact on the risk exposure of credit institutions and banks, the final version is expanded to include “hierarchical superiors” of capital markets professionals.

The inclusion of hierarchical superiors targets those within the organizational chain who are responsible for decisions on the firm’s strategic orientation, its financial exposure and the investment policy to be used by traders on the capital market.
The new company tax will be paid by the employer rather than the bonus recipient. The 50% tax will be assessed on the gross portion of a bonus paid for calendar year 2009 that exceeds EUR 27,500. Included within the scope of the tax are payments made in consideration for individual or collective performance, including awards, the payment or vesting of which are subject to conditions (e.g. stock options, free share awards or deferred compensation). Amounts derived from qualified profit sharing or participation schemes are not subject to the bonus tax.
As noted above, the tax is due on 1 April 2010. If all or part of the bonus is awarded after that date, the tax will be due on the first day of the month following the date the award decision is made.

A special tax return will have to be submitted to the French tax authorities within 25 days of the due date.
Credit institutions and banks should immediately take steps to define the extent of their exposure to the one-time tax.

This material has been prepared by professionals in Taj, French tax and legal firm, member of Deloitte Touche Tohmatsu