Management Packages: New mechanism provided for in the French Finance Bill for 2025
Estimated reading time 6 minutes
The French Finance Act for 2025 is radically changing the tax and social security treatment of management packages.
This new regime applies to “the net gain realised on securities subscribed to or acquired by employees or corporate officers or allocated to them, which is acquired as consideration for their duties as an employee or director in the company issuing these securities, in any company in which the issuing company directly or indirectly holds a share of the capital or in any company which directly or indirectly holds a share of the capital of the issuing company.”
In short
If you're a manager or executive receiving shares as part of your job compensation, and those shares are tied to your company or related companies, this new regime will determine how your profits (gains) resulting from the sale of those shares are taxed.
Only gains on sale of the shares not linked to duties would be excluded from the scope of these new provisions.
The French Tax Regulations related to this new regime, as published on Wednesday 23 July 2025 provide additional guidelines in this respect:
“The existence of a consideration is determined in particular with regard to:
- the achievement of performance levels, either of the company or of the investment made by other investors in the company (assessed, for example, by a minimum internal rate of return);
- the obligation on the employee or director to comply with certain contractual stipulations such as a non-competition clause, an obligation of loyalty and exclusivity towards the company issuing the shares, its "parent company" or its "daughter company", or a clause prohibiting the transfer of the shares, clauses governing the conditions of disposal of the shares (joint exit obligation or right in the event of disposal by the majority shareholders) or a promise to sell or purchase the shares of the employee or manager in the event of termination of their duties (departure, death) or breach of their undertakings. (…)
The existence of consideration is established in particular where the employee or manager:
- benefits from any type of mechanism enabling him to receive, on the sale or disposal of his shares, subject to the fulfilment of performance criteria, a gain distinct from that to which his share in the capital should entitle him (by way of illustration, the case of so-called "ratchet" ADPs);
- holds shares (ordinary or preference) acquired as part of a "sweet equity" transaction that enables it to hold a larger share of the capital of the company issuing the securities than it would have been entitled to, for an equivalent investment, if the other shareholders had also invested exclusively in equity securities.”
Which securities are covered by these rules?
All securities, including ordinary or preference shares, bonds and warrants, are likely to be considered, including those issued under a specific qualifying scheme, such as BSPCE, RSUs/PSUs or stock options.
However, the securities must present a risk of loss of value or capital and have been held for at least two years. This last condition is not required when they were acquired under a legal scheme: BSPCE, RSUs/PSUs or stock options.
What is the profit involved?
The net gain referred to in the text corresponds to the capital gain on the sale of the shares concerned.
Consequently, for regulated employee share ownership schemes, such as qualified RSUs/PSUs, qualified stock options or BSPCEs, the specific tax and social security regime applicable to gains realized upon vesting of shares or exercise of options or warrants is not amended by this new provision, which only concerns the increase in value of the securities after their acquisition or subscription.
Applicable tax and social security system
The general principle is that all income earned by people covered by this scheme is taxed as salaries.
By way of exception, part of these gains may be considered as capital gains, and taxed under the conditions set out in article 150-0 A of the CGI, up to an amount determined as follows:
[Acquisition price *3* (Actual value upon disposal/Actual value upon acquisition)] – Acquisition price
Where:
- Acquisition price corresponds to the price paid for the subscription or acquisition of the shares (or the value on the vesting date in the case of RSUs/PSUs);
- Actual value upon disposal corresponds to the real value of the company issuing the securities on the date of disposal of the securities (or any other transaction mentioned in article 150-0 B of the CGI and relating to the said securities - e.g. merger, demerger, conversion, division, contribution to a company subject to corporation tax);
- Actual value upon acquisition corresponds to the actual value of the issuing company on the date the shares were acquired or subscribed for (or, in the case of RSUs/PSUs, on the date of grant);
- Actual value corresponds to the actual value of the issuing company's shareholders' equity plus debts owed to any shareholders or affiliated undertakings within the meaning of Article 39, 12 of the General Tax Code.
As a result of these new provisions, employees and corporate officers will now be taxed on their gain on sale as follows:
| Tax categories | Amount taxed | Taxation |
Capital gain | Amount below the above limit | 12.8% income tax (application of the progressive scale on option) 17.2% social surtaxes 3 to 4% CEHR (exceptional contribution on high income) i.e. a maximum total tax rate of 34% |
Salaries | Amount above the above limit | Progressive income tax scale (up to 45%) 3 or 4% CEHR 10% specific employee contribution (until 31 December 2027) i.e. a maximum total tax rate of 59% |
From a social security perspective, the new rules explicitly provide for the exclusion of gains from the basis of social security contributions payable by the employer and the employee, regardless of the origin of the acquisition of the shares.
This new regime applies to disposals of shares (and other events giving rise to taxation) made on or after 15 February 2025.
Outstanding questions or issues
These new rules still leave us with several uncertainties, even following the publication of the new Tax Regulations.
For example:
- How will the actual value of a company be assessed to calculate the limit, particularly for listed and/or foreign countries?
- How can this system be interpreted with regard to international tax treaty applications?
- Will issuing companies have any obligations towards their shareholder-managers and/or the tax authorities, specifically regarding the valuation of their shareholders’ equity and the disclosure of this information?
- Will employees be able to challenge the amounts provided by the company?
We will keep you updated on further changes or news on this and, in the meantime, feel free to ask us any questions.