FRANCE Law and Practice Contributed by: David-James Sebag, Donald Davy and Marie-Sophie Chevreteau, Gide Loyrette Nouel
• the “disposal gain” (corresponding to the dif - ference between the sale price of the shares and the FMV of the shares on the exercise date) at the effective tax rate (including per - sonal income tax and social security contribu - tions, and unless a specific option is selected) of 30%. Warrants (BSA) For the issuer – no tax or social security con - tributions incurred by the issuer/employer per se upon allocation/exercise of the warrants (to the extent that the warrants have been issued/ subscribed to at a price reflecting their FMV). For the beneficiaries – gains realised on these warrants are, in principle, subject to the capital gains tax regime (ie, a flat tax rate). Despite the new rules introduced by the French Finance Act for 2025, these instruments may still be negatively viewed by the French tax authori - ties and particularly by the French social security authorities (URSSAF). Free Shares For the issuer: a specific employer social secu - rity contribution amounting to 30% of the FMV of the free shares at the end of the vesting period (ie, upon issuance of the shares, with the issu - ance date being at least one year after share allocation). For the beneficiaries: taxation upon disposal of the shares (no taxation before) of: • the “acquisition gain” (corresponding to the FMV of the shares at the issuance date) at an effective tax rate (including personal income tax and social security contributions) of a maximum of 38% (including deductible CSG) for the portion below EUR300,000 and 61.6%
(including deductible CSG) for the portion above EUR300,000; and • the “disposal gain” (corresponding to the dif - ference between the sale price of the shares and the FMV of the shares on the issuance date) at an effective tax rate (including tax and social security contributions, and unless a specific option is selected) of 30%. General Comments The French Finance Act for 2025 introduced a new mechanism which may limit the applica - tion of the capital gains tax regime applicable to securities held by managers (when such securi - ties have been granted/subscribed to or acquired in consideration for the duties performed by such managers). The capital gains tax regime may not be available for shares subscribed to/ granted for free if the net gain realised by the beneficiary (calculated excluding the exercise/ acquisition gains on BSPCE/stock options/free shares) exceeds a multiple of three (3) times the company’s financial performance over the period between the entry and exit dates of such “instruments” . The portion of the net gain real - ised by the beneficiaries exceeding this multi - ple should be treated as “employment income” and be subject to an effective tax/social security rate of a maximum of 59%. In practice, this new mechanism is for use in situations involving “lev- erage effect” or “ratchet” attached to the shares held by the managers (and, therefore, primarily in LBO-type structures). The recently introduced provision is being significantly debated at pre - sent by the government and private equity pro - fessionals. Potential amendments may be voted by Parliament in the coming months and will be subject to comment by the French tax authori - ties in their guidelines (to be published soon). Note, also, that the French Finance Act for 2025 introduced “top-up” tax (referred to as “con-
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