Key points
- The taxation of management packages is governed by Article 163 bis H of the French General Tax Code (CGI): the gain received in return for the manager’s duties is taxed as a capital gain within a performance-related limit, and as salary beyond it.
- The capital gains regime requires securities that carry a risk of loss and, except for free shares, stock options and BSPCE (French start-up share warrants), that have been held for at least two years.
- The limit is a multiple equal to three times the change in the company’s real value between acquisition and sale; any excess is taxed as salary.
- Share warrants (BSA) subscribed by managers fall in principle under this regime: a nominal exercise price or the absence of a risk of loss exposes the gain to taxation as salary.
- Making the package legally sound starts before it is put in place: document the valuation, the reality of the risk of loss and compliance with the holding period.
The taxation of management packages is one of the most sensitive issues in LBO transactions. For sales carried out since 15 February 2025, Article 163 bis H of the French General Tax Code (Code général des impôts) (in French) governs how the gain made by managers on exit is taxed. The gain received in return for the duties of an employee or corporate officer is in principle taxed as salary, at the progressive income tax rates. It nevertheless falls under the more favourable capital gains regime, within a limit linked to the company’s performance.
See also: structuring the tax position of company executives.
Which part of the gain is taxed as a capital gain?
When the manager sells their securities (ordinary shares, preference shares, shares obtained by exercising BSA), the net gain falls under the capital gains regime for securities within a precise limit. This limit is a multiple equal to three times the ratio between the company’s real value at the sale and its real value when the securities were acquired. The securities must carry a risk of loss. Except for free shares, stock options and BSPCE, they must also have been held for at least two years.
Which part of the gain is taxed as salary?
The portion of the gain that exceeds this limit is taxed under the rules for wages and salaries, for the year of the sale. The whole gain follows these same rules where the two-year holding period is not met. Artificially favourable investment terms (an entry price well below real value, a guaranteed return of capital, no risk of loss) therefore expose the gain to taxation as earned income.
The limit is reduced by the dividends and capital repayments received by the manager between the acquisition and the sale of the securities. Where the securities are held through a managers’ holding company, the real value taken into account is that of the company in which this holding company has invested. These parameters must be checked as soon as the package is structured.
How are share warrants (BSA) taxed?
Share warrants (bons de souscription d’actions, BSA) are an instrument frequently used in management packages. The gain they generate falls under Article 163 bis H where it is received in return for the beneficiary’s duties. The conditions of a risk of loss on the price paid and a holding period of at least two years then apply. Failing that, or beyond the statutory limit, the gain is taxed as salary.
Documenting the package and making it legally sound upfront
Making a management package legally sound from a tax perspective starts before it is put in place. The points to document include the valuation used for the managers’ entry price (with an economic justification), the reality of the risk of loss (a significant amount invested, no guarantee), the exercise or award conditions of the instruments used, compliance with the two-year holding period and the consistency of the structure with market practice.
A package structured with these precautions is more robust in a tax audit. A package put in place without attention to these points exposes the managers to a significant tax risk on exit, when the stakes are highest.
For assistance with the tax structuring of your package, see our dedicated pages on management package lawyers and tax lawyers.
