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France Tightens Tax Rules on Termination

February 27, 2006

By Nicolas Zouaghi-Maulet

Effective as of January 1, 2006, France revised its tax rules on health insurance, social security contributions and income tax payments related to severance and retirement compensation, as well as to payments to company directors or officers in connection with their removal and retirement. These payments continue to benefit from a favorable tax treatment as far as health insurance, social security contributions and income taxes are concerned. The new tax rules, however, lower by nearly 50% the overall amount of such payments that has hitherto been exempt from inclusion in the amount, subject either to health insurance, social security contributions or income taxation.