Taxation of Shares

This update takes into account the tax impacts of the Finance Act published in 2012.

Update on share-related tax rules.

INDIVIDUAL SHAREHOLDERS RESIDING IN FRANCE

Shares can generate two types of gains:

• Dividends: part of the profit distributed to shareholders according to company results
• Capital gains: difference between the purchase price and selling price of your shares, if the selling price is higher than the purchase price (if the opposite is true, this is called a capital loss)

 
In the calculation of income tax, only dividends and capital gains are taken into account. According to the French regulations in force, the holding of shares is not taxable in and of itself, and does not need to be declared (except for tax on capital: see below).

Tax treatment of dividends (except for shares held within a share savings plan [Plan d’épargne en action – PEA])

The flat-rate withholding tax option on dividends received since January 1, 2008 has been upheld for dividends received in 2012.
 
Thus, for dividends paid as of January 1, 2012, the taxpayer can either choose to be taxed according to the general system, or opt for the flat-rate withholding tax (prélèvement forfaitaire libératoire – PFL).

In addition, the Second Amending Finance Act raised the social contribution withholding tax rate on dividends received as of October 1, 2011 (see below).
 
General tax system
 
This is the system which is applicable to shareholders who do not opt for flat-rate withholding (PFL).

To determine the taxpayer’s overall income in this case, dividends are measured on a progressive income tax scale as investment income for the year in which they are earned.

Under this plan, before the taxpayer’s dividends are taxed, he is allowed a rebate of 40% on the gross dividend amount, as well as an annual lump-sum allowance of €1,525 for individuals or €3,050 for a couple filing jointly, after deducting the 40% rebate.

However, for the income earned in 2010 and subsequent fiscal years, the taxpayer may no longer claim the tax credit of 50% of the dividend received (i.e., before deduction of the above-mentioned rebates), capped at €115 for individuals or €230 for a couple filing jointly.

Furthermore, because it is investment income, before the rebates are deducted, the dividend amount is subject to the five social contributions described below, totaling 12.3% for income received as of January 1, 2011 until September 30, 2011, and 13.5% for income received as of October 1, 2011 (for income received up until December 31, 2010, the rate of the social contributions was 12.1%):

• The general social contribution (contribution sociale généralisée – CSG) at the rate of 8.2%, of which 5.8% is deductible from the total taxable income in the year it is paid
• A social contribution of 2.2% (as of January 1, 2011 through September 30, 2011, and then 3.4% as of October 1, 2011, which is non-deductible from taxable income
• The additional levy to the social contribution of 2.2% (and then 3.4% as of October 1, 2011) at the rate of 0.3%, which is non-deductible from taxable income
• The additional levy to the social contribution of 2.2% (and then 3.4% as of October 1, 2011) to finance the Active Solidarity Income (Revenu de Solidarité Active – RSA) plan, deducted at the rate of 1.1%, non-deductible from taxable income (instituted in 2009)
• A contribution to pay down the social debt (contribution pour le remboursement de la dette sociale – CRDS) at the rate of 0.5%, which is non-deductible from taxable income

Optional flat-rate withholding scheme (PFL)
 
Shareholders can opt for the PFL on dividends at a rate of 21% for income received as of January 1, 2012 (19% for income received up until Dec. 31, 2011). Such dividends are then exempted from the shareholders' total income.
This option must be expressly stated to the paying entity before collecting income on one’s account, and is irrevocable once payment is made.
 
Please note:

• If the shareholder opts for the PFL, the tax is calculated on the gross amount of the dividends, and none of the above-mentioned general tax rebates will be applied.
• A shareholder who opts for the PFL in a particular year, even for a single dividend payment, will not be eligible for the above-mentioned rebates or general tax credits, for any of the dividends received (including those subject to the progressive scale).

 
Moreover, the five social contributions withheld totaling 12.3%, for income received as of January 1, 2011 until September 30, 2011, and subsequently for income received as of October 1, 2011, are also applicable to dividends taxed under the PFL option. However, unlike the dividends subject to the progressive scale, no portion of the CSG is deductible from the total income.
 
The overall tax rate when choosing the PFL option is therefore 34.5% of the gross total of dividends received as of January 1, 2012 (for reference: 31.3% for income received as of January 1, 2011 until September 30, 2011 and 32.5% for income received as of October 1, 2011 through December 31, 2011).

CAPITAL GAINS TAX

General tax system
 
- Capital gains earned in 2009 and previous years

Capital gains from the sale of shares are taxable only if the amount of the annual sales exceeds a certain limit:
 
For disposals in 2009, the limit is set at €25,730.

If the limit is not exceeded, the capital gains on sales made in fiscal 2009 are exempt from income tax and social contributions.

If the limit is exceeded, all capital gains made will be taxed at the overall rate of 30.1% (18% income tax + 12.1% social contributions).
 
- Capital gains made as of January 1, 2010
 

For capital gains made as of January 1, 2010, income tax and social contributions need to be considered separately.

Capital gains on the sale of shares are only subject to 18% income tax if the amount of the sales exceeds a certain limit. For share sales made as of January 1, 2010, the limit is set at €25,830.

If the limit is not exceeded, capital gains from the sale of shares are not subject to the 18% income tax. On the other hand, they will be subject, from the first euro of shares sold, to social contribution at the rate of 12.3% (and the taxation threshold effectively no longer applies for social contributions). With regard to capital gains, the increase in the social contribution withholding tax rate from 12.1% to 12.3% is applicable as of the first sales made during the 2010 fiscal year.

If the limit is exceeded, all of the capital gains realized will be taxed not only on social contributions at 12.3%, but will also be subject to the 18% income tax, for an overall tax rate of 30.3%.

Capital losses incurred since January 1, 2002 may be deducted from capital gains of the same type made during the year the shares are sold or the following 10 years. In principle, this is possible only if the annual sale limit for the marketable securities (€25,730 in 2009 / €25,830 in 2010) has been exceeded for the year in question.
 
However, in order to harmonize the amount of capital loss carryover as of January 1, 2011, with respect to income tax and social contributions (see below: tax threshold eliminated for capital gains made in 2011), two transitional measures have been set up:
 

• The capital losses carried over on January 1, 2011 below the sale limit of €25,830 can be deducted (on income tax and social contributions) from the capital gains made from 2011 to 2020.
• Concerning capital losses carried over on January 1, 2010 below the sale limit of €25,730, no income tax deduction can be made in 2010 against capital gains (capital losses can only be deducted on social contributions). To offset this, a tax credit of 19% of the amount of those capital losses charged to capital gains made in 2010 can be applied to social contributions. This tax credit can be applied to income tax for 2010.

 
- Capital gains made as ofJanuary 1, 2011
 
Capital gains from the sale of shares are now subject to both income tax and social contributions, regardless of the value of shares the taxpayer sells during the year (the tax threshold has been eliminated both for income tax and social contributions).

Furthermore, the Second Finance Act of 2011 retroactively modified the social contribution deduction rates applicable to capital gains derived from shares sold as of January 1, 2011.

Thus, from the first euro of shares sold, all of the capital gains realized as of January 1, 2011 will be taxed at the overall rate of 32.5% (i.e., income tax rose from 18% to 19% + social contributions went from 12.3% to 13.5%).

Capital losses incurred since January 1, 2002 can be deducted from capital gains of the same type made during the year shares were sold, or during the subsequent 10 years. This can now be done from the first euro of shares sold, for net capital losses recorded as of 2011 (see above: transitional measures for other capital losses).
 
Special measures for share savings plans (PEA)
 
GDF SUEZ shares are PEA eligible.

The PEA is capped at €132,000 (€264,000 per couple).

Under certain conditions, the PEA entitles holders to the following:
 

• For the duration of the PEA, an income tax and social contribution exemption on the net income and net capital gains generated by the investments made within the PEA, provided such income and capital gains remain in the PEA.
• Upon closing the PEA (if more than five years after the PEA opening date), or upon partial withdrawal (if more than eight years after the PEA opening date), an income tax exemption on the net gains made since the opening of the PEA. However, such income or capital gains remain subject to social contribution withholding at the rate applicable on the date the gains are realized.

 
Beginning in fiscal year 2010, income earned as part of a PEA no longer entitles members to a tax credit of 50% of the dividend, capped at €115 or €230 depending on the beneficiary's family status, because this tax credit has been eliminated.

Capital losses incurred on shares held as part of a PEA are in principle only deductible from capital gains that are also made in the PEA. However, in the event the PEA is closed early (before the end of the 5th year), or as of January 1, 2005 in the event the PEA closes after the 5th year, the capital losses recorded may under certain conditions be deducted from gains of the same type realized outside the plan (on an ordinary share account) during the fiscal year just completed or during the subsequent ten years.
 
In the event the PEA is closed before the end of the 5-year term, the dividends and capital gains realized shall be taxed at the following rates (from the first euro of shares sold as of January 1, 2011) :

Solidarity tax on wealth

Shares held by individuals as part of their private assets shall be included in their taxable assets and, where applicable, considered when calculating the solidarity tax on wealth (l’impôt de solidarité sur la fortune – ISF). Concerning the value to be declared, the taxpayer can opt either for the last trading price on December 31, 2010 (€26.85) or the average of the last 30 trading prices over the last thirty trading days of the calendar year (€27.15617).

(Source : Société Générale Securities Services)

Stock exchange tax 

The stock exchange tax was eliminated on January 1, 2008.

SHAREHOLDERS RESIDING OUTSIDE FRANCE (except Belgium)  

Tax on dividends

In principle, when the beneficiary's actual tax residence or head office is located outside France, dividends paid by GDF SUEZ are subject to a 30% withholding tax, charged by the establishment paying out the dividends.

However, this withholding tax may be reduced (usually to 15%) in accordance with international tax treaties. It is up to the shareholders concerned to ask their tax advisors to determine whether such provisions apply to their particular case and find out how they can be implemented, as set out in the February 25, 2005 instruction (4 J-1-05) concerning the so-called "normal" procedure or so-called "simplified" procedure for withholding tax reductions.

The €115 or €230 tax credit, depending on the beneficiary's family status, as set out in Article 200 G (article 200 septiès) of the French General Tax Code (Code Général des Impôts – CGI), which could, in theory, be transferred to non-resident beneficiaries pursuant to the tax treaties, has been eliminated for income tax payable for the year 2010.

Capital gains tax

Subject to the provisions of applicable international tax treaties, capital gains made on the sale of shares by persons who do not reside in France within the meaning of Article 4 B of the CGI, are generally not subject to income tax in France.
 
Please note: gross sales of shares must be declared to the tax authorities (Non-Residents’ Tax Center [Centre des Impôts des Non Résidents]).

Solidarity tax on wealth

Private individuals who are not tax residents in France within the meaning of Article 4B of the CGI are not liable for tax on wealth in France pursuant to their financial investments.

However, equity interests are not considered as financial investments and may thus be liable for tax on wealth, subject to the provisions of international tax agreements.