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RSUs, free share awards and stock options: what are they?
→ RSUs and free share awards
RSUs (restricted stock units) allow you to receive shares in your employer’s company without purchasing them.
The award generally depends on completing a period of service with the company. You become the owner of the shares when your entitlement becomes unconditional, a process known as vesting.
→ Stock options
Stock options give you the right to buy shares at a price fixed in advance, known as the exercise price. When you use this right, you “exercise” the option and purchase the shares at the agreed price.
French-qualified or non-qualified plans: a crucial distinction
Under French law, a plan is “French-qualified” when it complies with the provisions of the French Commercial Code applicable to stock options or free share awards.
A foreign plan may benefit from French-qualified treatment if it meets the relevant conditions, where necessary through a French sub-plan.
The plan’s qualification is essential: it determines both when the gain is taxed and its treatment for tax and social contribution purposes.
| Award | Non-qualified plan | French-qualified plan |
|---|---|---|
| RSUs and free share awards | The vesting gain is taxed at vesting | The gain is calculated at vesting, but taxed when the shares are sold |
| Stock options | The exercise gain is taxed when the options are exercised | The gain is calculated on exercise, but taxed when the shares are sold |
This table sets out the general rules. For French-qualified stock options, any excessive discount is subject to a separate rule.
Non-qualified plans: ordinary employment income. The gain should generally be processed through payroll, with the applicable social security contributions and, for French tax residents, income tax withholding at source.
French-qualified plans: a specific regime. The gain falls within the specific tax and social contribution regime applicable to free share awards or stock options. Tax rates and treatment depend, in particular, on the date the plan was authorised or the award granted, the amount involved and, where relevant, how long the shares are held.
→ Focus — the French impatriate tax regime
Gains from French-qualified plans fall within their own preferential regime, the treatment of which depends, in particular, on the plan’s characteristics and dates.
For non-qualified free share awards, treating the gain as ordinary employment income could allow it to be included in the remuneration used to calculate the flat-rate 30% exemption, subject in particular to the reference salary requirement. However, the French tax authorities’ guidance does not expressly confirm this.
The position is even less certain for non-qualified stock options.
In both cases, a tax ruling is recommended before applying the exemption. For further information, see our article on the French impatriate tax regime.
International mobility: how are taxing rights allocated?
→ The gain is linked to employment
Under OECD principles and French tax guidance, the vesting gain on RSUs or free share awards and the exercise gain on stock options constitute employment income within the meaning of Article 15 of the OECD Model Tax Convention.
The right to tax the gain therefore belongs to the country or countries where the employment rewarded by the award was exercised. The country of residence at the time of sale does not, by itself, determine which country may tax the gain.
→ The reference period
The gain is allocated by reference to the period during which the employee earned the entitlement:
| Award | Reference period |
|---|---|
| RSUs and free share awards | From the grant date to the date on which the right to receive the shares becomes unconditional, generally the vesting date |
| Stock options | From the grant date to the date on which the right to exercise the option becomes unconditional |
Where a plan provides for several vesting dates, the reference period should generally be determined separately for each tranche.
If neither continued employment nor any professional performance target is required, the right may be considered earned at grant. The reference period may then be limited to that date.
→ Calculating the allocation
Where employment was exercised in several countries during the reference period, the gain is allocated between them.
This allocation nevertheless requires the country where the work was performed to have the right to tax the salary under the applicable tax treaty. The temporary assignment rule, often called the “183-day rule”, may, in particular, preserve taxing rights for the country of residence.
In these situations, it is advisable to consult a tax adviser sufficiently early to identify which countries may tax the gain, determine the portion attributable to each and check reporting obligations and the mechanisms for eliminating double taxation.
You are a French tax resident
Tax residence is assessed when the taxable event occurs: the vesting of non-qualified RSUs or free share awards, the exercise of non-qualified stock options or, in principle, the sale of shares under French-qualified plans.
→ Determining tax residence
Article 4 B of the French General Tax Code sets out the main criteria for French tax residence: the home or principal place of stay, the main professional activity and the centre of economic interests.
In principle, meeting any one of these criteria is sufficient to be considered a French tax resident, subject to the rules of the applicable tax treaty. For further information, see our FAQ on tax residence.
→ Tax liability on worldwide income
Under Article 4 A of the French General Tax Code, French tax residents are subject to tax on their worldwide income. They must report their French-source and foreign-source income in France, including the full amount of their gains from RSUs, free share awards or stock options.
Where the reference period covers several countries, the tax return must distinguish the French-source and foreign-source portions of the gain:
- the portion attributable to employment exercised in France is taxable in France under the regime applicable to the plan;
- the portion attributable to employment exercised abroad must also be reported. Where that portion is taxable or actually taxed in the other country, depending on the wording of the tax treaty, France grants the tax credit provided for by that treaty to prevent double taxation.
The nature and amount of the tax credit therefore depend on each treaty. Physical presence abroad alone is not sufficient: it is necessary to check that the other country actually had the right to tax the gain.
Given the interaction between the applicable treaty provisions, the OECD Model Commentary and case law, this issue requires a case-by-case analysis.
I regularly assist taxpayers with this issue to determine which tax credit may be claimed and substantiate the position taken in their French tax return.
→ Example: moving to France during the vesting period
An employee is granted RSUs on 1 January 2025 while working and living in the United Kingdom. The plan requires continued employment until vesting on 31 December 2027. The employee moves to France and starts working there on 1 January 2026.
The reference period covers three years: one year in the United Kingdom and two years in France. On a simplified basis, one third of the gain is therefore attributable to employment exercised in the United Kingdom and two thirds to employment exercised in France.
If the employee is a French tax resident when the taxable event occurs, the full gain must be reported in France. The UK portion, which may be taxed in the United Kingdom, may qualify for the tax credit provided for by the France–UK tax treaty. The two thirds attributable to employment exercised in France are taxable in France without a tax credit.
You are not a French tax resident
Leaving France does not remove French taxation of gains from RSUs, free share awards or stock options.
Non-residents remain taxable in France on their French-source income. Where all or part of the gain rewards employment exercised in France during the reference period, that portion remains taxable in France, subject to the applicable tax treaty.
→ How is French tax collected?
Where the beneficiary is non-resident when the taxable event occurs, the French-source portion of the gain is generally subject to withholding tax under Article 182 A ter of the French General Tax Code.
This withholding is not an additional tax. It is a way of paying the French tax owed by the non-resident on the French-source gain. It therefore plays a role comparable to income tax withholding on residents’ salaries.
Depending on the type of plan:
- for a French-qualified plan, withholding generally takes place when the shares are sold;
- for a non-qualified plan, it takes place when the shares vest or the options are exercised.
Withholding is generally carried out by the employer, broker or institution responsible for paying the sale proceeds or recording the benefit.
→ Example: selling shares several years after leaving France
An employee is granted RSUs under a French-qualified plan on 1 January 2025 while living and working in France.
The employee leaves France on 1 January 2026 to work in the United Kingdom. The shares vest on 31 December 2027 and are then sold in September 2033, more than seven years after the employee left France.
On a simplified basis, the reference period runs from 1 January 2025 to 31 December 2027:
- one third of the vesting gain relates to employment exercised in France;
- two thirds relate to employment exercised in the United Kingdom.
As the plan is French-qualified, French taxation of the vesting gain arises when the shares are sold. In 2033, even though the employee has been non-resident for several years, the French-source third of the gain remains taxable in France and is generally subject to withholding tax under Article 182 A ter of the French General Tax Code.
The capital gain arising between the shares’ value at vesting and their sale price must be distinguished from the vesting gain. It is subject to the separate rules governing gains on securities and the applicable tax treaty.
Capital gains on disposal: a separate gain
When shares are sold, the employment-related gain must be distinguished from the capital gain reflecting the increase in the value of the shares since their acquisition.
| Award | Employment-related gain | Capital gain on disposal |
|---|---|---|
| RSUs and free share awards | Value of the shares at vesting, less any price paid | Sale price less the value of the shares at vesting |
| Stock options | Value of the shares on exercise, less the exercise price | Sale price less the value of the shares on exercise |
Example. An employee’s 100 RSUs vest when the share price is €50, and the shares are then sold when the price is €70.
The vesting gain is €5,000.
The capital gain on disposal is €2,000.
Even when they are taxable in the same year, these two gains must be reported separately and are subject to different tax rules.
→ You are a French tax resident when the shares are sold
The capital gain on disposal is generally taxable in France under the rules governing gains on securities.
For disposals made on or after 1 January 2026, the default flat tax is 31.4%, comprising:
- 12.8% income tax;
- 18.6% social levies.
Taxpayers may elect to be taxed at progressive income tax rates. This election applies to all relevant investment income and gains of the tax household for the year.
Available capital losses on securities may be set against capital gains of the same nature realised in the same year. Any excess may be carried forward for ten years.
→ The French impatriate tax regime
Where the conditions of Article 155 B of the French General Tax Code are met, certain capital gains on securities held abroad may qualify for a 50% income tax exemption.
This exemption does not reduce social levies and applies only to the capital gain on disposal, excluding the vesting gain on RSUs or free share awards and the exercise gain on stock options.
Its application depends, in particular, on where the custodian of the securities is established and how the sale proceeds are received. For further information, see our article on the French impatriate tax regime.
→ You are not a French tax resident when the shares are sold
Where the beneficiary is non-resident when the shares are sold, the capital gain on disposal is generally not taxable in France. This rule applies only to the capital gain: the French-source portion of the employment-related gain may remain taxable in France and subject to withholding tax under Article 182 A ter of the French General Tax Code.
Frequently asked questions
→ Is an RSU automatically a French-qualified free share award?
No. The plan’s commercial name is not sufficient. The plan must be reviewed against the conditions set out in the French Commercial Code. Its qualification determines, in particular, when the gain is taxed and its treatment for tax and social contribution purposes.
→ When is the gain taxable in France?
For a non-qualified plan, the gain is generally taxable when the RSUs or free share awards vest, or when the stock options are exercised.
For a French-qualified plan, the gain is generally taxed when the shares are sold.
→ Must the capital gain on disposal be allocated according to days worked in each country?
No. Allocation according to employment exercised in each country concerns the employment-related gain. The capital gain arising after vesting or exercise is subject to the separate rules governing gains on securities.
→ Does leaving France before selling the shares avoid all French tax?
No. If part of the gain rewards employment exercised in France during the reference period, that portion may remain taxable in France several years after departure.
→ Can a tax credit be granted without tax actually paid abroad?
Yes, in some situations. It depends on the wording of the double taxation relief clause in the applicable tax treaty. Some treaties refer to income taxable in the other country, while others require actual taxation.
→ Which documents should you keep?
It is advisable to retain, in particular:
- the full plan rules and any French sub-plans;
- the grant and vesting documents for each tranche;
- evidence of exercise and sale;
- the value of the shares at the relevant dates;
- your history of countries of employment and residence;
- broker statements and payslips;
- tax returns and evidence of tax paid abroad.
How can the firm help you?
The tax treatment of RSUs, free share awards and stock options generally cannot be determined from the broker’s statement alone. It requires a combined review of the plan, French rules, the beneficiary’s employment history and the applicable tax treaties.
The firm can assist you with:
- analysing the tax treatment of your RSUs, free share awards and stock options;
- determining the French-source and foreign-source portions of the gain;
- assisting with your tax reporting obligations as a resident or non-resident;
- preparing tax simulations and estimating income tax and social levies;
- developing a strategy for selling your shares over time.
I assist employees, executives and businesses before a transaction, when preparing the annual tax return or when regularising previous years. An initial consultation identifies the main issues in the case and defines the work required.