Stock savings plan and Brexit
British stock and some other financial instruments shall be sold by 30 September 2021
Investing in a stock savings plan (Plan d’Epargne en Actions – PEA) may provide an income tax exemption to French tax residents. Among other requirements, such an exemption is granted to taxpayers who invest in EU-based companies’ stock or buy into EU-based UCITS funds which concentrate a minimum 75% EU-issued eligible stock or UCITS.
As a result of Brexit, both stock or UCITS by a British issuer are disqualified and some EU-based UCITS funds’ underlying British financial instruments may also be so. Such a disqualification may lead to the termination of the savings plan and the resulting income tax for investors.
Initially, Brexit was to happen in late March 2019. The French government had then decided that British stock or other financial instruments would remain PEA eligible for a few extra months. However, Brexit was delayed again and again to eventually happen on 31 January 2020.
The best British series of all times has come to an end on 31 December 2020. In this setting, the French government has just issued a new governmental order and implementing decree to extend PEA eligibility (17 and 27 December 2020 Official Gazette).
First and foremost, as of 1 January 2021, investors should no longer purchase stock from British companies or buy into British-based UCITS funds.
For those instruments which were already under the stock savings plan on 31 December 2020, investors will have an extra nine months, that is until 30 September 2021, to take them out of the plan either by trading them or withdrawing them from the plan -in the latter case, a cash payment will have to compensate.
Regarding both British and EU-based UCITS funds, the 75% minimum investment in EU financial instruments will be deemed to be met, including British instruments, until 30 September 2021, on the understanding that EU-based UCITS will use those extra 9 months to trade those British financial instruments in order to remain eligible.