01
Taxation of executives and private equity
The new tax regime for management packages (2025)
The Finance Act for 2025 created a dedicated legal framework for management package gains, in Article 163 bis H of the French Tax Code. The principle is now settled: the portion of the gain that remunerates the duties of the executive or employee is taxed as salary, while the portion that remunerates a genuine investor risk falls under the capital gains regime for securities, subject to a cap indexed to the company's actual performance. The firm assists executives and funds in structuring these arrangements and securing the characterisation of the gain.
Paris · Geneva · Marseille · Cannes · Lisbon
— 01
What the 2025 reform changes
The reform establishes a dedicated statutory regime where, since the decisions of the Conseil d'État of 13 July 2021, a case-by-case assessment had prevailed. Article 163 bis H of the French Tax Code, introduced by the Finance Act for 2025, now splits the gain realised on a management package into two distinct components, each subject to its own tax regime.
The first component is the acquisition gain, that is, the benefit derived from the duties performed where the securities were acquired at a price below their real value. This benefit is taxed as salary, at the progressive income tax scale, together with the related social security contributions and the specific employee contribution.
The second component is the disposal gain, which falls under the capital gains regime for securities, but only up to a cap. This cap is based on the company's actual financial performance between the acquisition and the disposal of the securities: the fraction of the gain exceeding the cap is reclassified as salary. The rationale is to reserve the capital gains regime for the gain that remunerates an investor risk, and to treat as salary what in reality remunerates the duties performed.
— 02
The dividing line, instrument by instrument
02
BSA and share warrants
03
BSPCE (Article 163 bis G)
04
Free shares (AGA)
— Your contact
Who assists you
— FAQ
Your questions on the 2025 reform
What does Article 163 bis H of the French Tax Code actually change?
It creates a statutory framework that splits the management package gain in two: the acquisition gain, taxed as salary, and the disposal gain, taxed as a capital gain on securities up to a cap. Introduced by the Finance Act for 2025, this provision replaces the case-by-case assessment that had prevailed since 2021.
How is the cap calculated beyond which the gain becomes salary?
The cap is based on the company's actual financial performance between the acquisition and the disposal of the securities. The fraction of the disposal gain that remains below the cap benefits from the capital gains regime; the fraction exceeding it is taxed as salary, under Article 163 bis H.
What is the difference in taxation between the two characterisations?
The portion treated as salary is subject to the progressive income tax scale, to social security contributions and to a specific employee contribution. The portion treated as a capital gain on securities is, in principle, subject to the flat tax. The gap in taxation between the two regimes remains substantial.
Are BSPCE affected by the reform?
BSPCE retain their dedicated regime under Article 163 bis G of the French Tax Code, which is distinct from the new framework. That regime remains favourable but is subject to strict conditions relating to the issuing company and the terms of the grant. Outside that regime, the gain follows the dividing line of Article 163 bis H.
Are the 2021 decisions of the Conseil d'État still relevant?
They remain relevant for transactions predating the entry into force of the new provision and for clarifying the notion of investor risk. The Conseil d'État had ruled, on 13 July 2021, that a gain essentially attributable to the duties performed is taxed as salary. The reform extends that logic by codifying it and quantifying it.
How can a package be secured under the new regime?
By valuing the securities correctly at entry, documenting the financial outlay and the risk actually borne, choosing the appropriate instrument and anticipating the calculation of the performance cap. The firm structures the arrangement upstream and defends it in the event of a tax audit, in coordination with the transaction's advisers.
Does the new regime also apply to social security contributions?
Yes: the portion of the gain treated as salary bears social security contributions and a specific employee contribution, while the capital gain portion is subject to social levies on investment income. The tax and social security aspects must be assessed together.
Cité par
A package to characterise under Article 163 bis H?
A confidential initial discussion to analyse the dividing line between acquisition gain and disposal gain, calibrate the performance cap and secure the arrangement.
© BENSAID Avocats. The information on this site does not constitute legal advice.