Management packages and BSPCE: the risk of reclassification
Have you realised a capital gain on shares, BSPCE, warrants or preference shares acquired in connection with your duties? The tax authorities are increasingly seeking to reclassify these gains as employment income, heavily taxed and subject to social contributions. The 2021 Conseil d'État rulings and the recent statutory framework have reshuffled the cards. The firm secures these arrangements and defends against reclassifications.
- Stake
- Capital gain (light taxation) versus salary (heavy taxation + contributions)
- Case law
- Conseil d'État plenary, 13 July 2021: reclassification where the gain derives from the duties
- Instruments
- Shares, preference shares, warrants (BSA), BSPCE, free shares
- BSPCE
- Dedicated regime (French Tax Code art. 163 bis G), subject to conditions
- Recent framework
- Statutory framework for management-package gains (2025 Finance Act, French Tax Code art. 163 bis H)
Capital gain or salary: a major stake
A management package associates executives and key managers with the value creation of the company, most often in connection with a private-equity transaction, by means of shares, preference shares, warrants (BSA), BSPCE or free shares. Depending on its characterisation, the gain realised on exit may fall within the scope of a capital gain on securities, under a generally more favourable regime, or of employment income, heavily taxed and exposed to a risk of social contributions or specific levies.
The difference in taxation between the two characterisations is considerable. It is precisely what makes this a favoured field of audit, with very high stakes for executives and funds alike.
Reclassification as employment income
By three plenary decisions of 13 July 2021 (no. 428506, 435452, 437498), the Conseil d'État set out a framework of analysis:
- The gain is taxed as employment income where it essentially derives from the duties of an executive or employee, rather than from a mere investor's risk;
- Under scrutiny are the acquisition price of the instrument (genuine financial effort and risk borne), the continued-employment and performance conditions, and the link with the exercise of the duties;
- A gain corresponding to a genuine capital risk, assumed as an investor, on the other hand retains the nature of a capital gain.
The boundary is therefore factual: everything turns on the reality of the investment, of the risk and of the link with the duties. Documenting the transaction is decisive.
A framework now clarified in law
Beyond case law, the legislature has intervened to frame the taxation of management-package gains (2025 Finance Act, French Tax Code art. 163 bis H), by delimiting the portion falling within the capital-gains regime and the portion taxed as a salary. BSPCE, for their part, retain their dedicated regime (French Tax Code art. 163 bis G), favourable but subject to strict conditions (eligible company, allocation terms). The combination of this statutory framework and of case law calls for an up-to-date analysis, instrument by instrument.
Secure and defend
Upstream, the firm structures and documents the package (acquisition price, genuine risk, conditions, choice of instrument) in order to secure the intended characterisation. During an audit, the defence focuses on the reality of the capital risk, the absence of an exclusive link with the duties, the application of the BSPCE regime or of the applicable statutory framework, and the challenge to contributions and penalties. The firm defends executives and funds before the tax courts, in coordination with the transaction's advisers.
Management packages and BSPCE: your questions
Why may a management-package gain be reclassified as a salary?
Because, according to the Conseil d'État (plenary, 13 July 2021), a gain that essentially derives from the duties of an executive or employee, rather than from an investor's risk, falls within employment income, and not within capital gains.
Which criteria distinguish a capital gain from a salary?
The acquisition price and the risk actually borne, the continued-employment and performance conditions, and the link with the exercise of the duties. A gain corresponding to a genuine capital risk remains a capital gain.
Are BSPCE concerned?
BSPCE benefit from a dedicated regime (French Tax Code art. 163 bis G), favourable but subject to strict conditions relating to the issuing company and the allocation terms. Outside this framework, the risk of reclassification exists as for the other instruments.
Has the law changed recently?
Yes. The 2025 Finance Act framed the taxation of management-package gains, by delimiting the portion falling within capital gains and the portion taxed as a salary. An up-to-date analysis, instrument by instrument, is indispensable.
How can a reclassification be guarded against?
By structuring the transaction around a genuine investment and a genuine risk, by choosing the appropriate instrument and by documenting the whole carefully. Support from the moment the package is put in place is the best protection.
A management package under audit or to be secured?
A confidential initial consultation to review the characterisation of the gain, secure the arrangement and defend against a reclassification as a salary.
This page presents the taxation of management packages and BSPCE for information purposes; each matter calls for a specific analysis. References to the French Tax Code and to the case law of the Conseil d'État in force at the date of writing.