Tax law
Our experts in DAF Magazine | Management Packages: evrything must change… so that nothing changes!
Published on 10/20/2026
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The 2025 Finance Act(1) introduced a new “management package” (MP) regime, applicable to gains on securities subscribed by employees or executives where those gains are deemed to have been earned in return for their duties as employees or executives of the issuing company, or of its parent company or a subsidiary.
A distinction is drawn between gains on “qualifying” securities (securities carrying a risk of loss and held for at least two years) and “non-qualifying” securities.
The acquisition gain on qualifying securities is subject(2) to income tax as employment income, at a marginal rate of up to 45%, except for the portion of the gain corresponding to three times the financial performance ratio (“MPF ratio”), which is taxed as a capital gain at the flat rate of 12.8%.
Article 24 of the 2026 Finance Act(3) fine-tunes this new regime as follows.
1.How the capital gains taxation cap is calculated
The multiple is now applied no longer to the price paid, but to the value of the securities(4).
The cap (three times the MPF ratio) is reduced by any income distributed or sums paid to the employees or executives upon a reduction or redemption of the company’s share capital between the acquisition date and the disposal date of the securities.
The value of the company is the fair value of its equity, plus the company’s debts owed to any shareholder or related company within the meaning of Article 39 12° of the French General Tax Code (CGI).
2.Tax deferral mechanism in the event of a restructuring(5)
Where the company issuing the MP securities undergoes a restructuring, the portion of the gain already existing at that date which exceeds(6) three times the MPF ratio will automatically benefit from a tax deferral.
This deferral will end(7) at a later date, upon the transfer, sale, buyback, redemption or cancellation of the securities received in exchange, as consideration for the contribution or exchange (in the case of a merger or demerger).
As the number of restructuring operations eligible for the tax deferral is not limited, it is therefore possible, in particular, to chain successive LBOs on a tax-neutral basis.
3.Gifts of securities
The taxation, still in the donor’s name, of the latent gain already existing on the date of a gift of MP securities (or of securities received in exchange following a restructuring) changes(8): previously, taxation was deferred until the donee sold the gifted securities; it now becomes immediate upon the gift, despite the absence of liquidity.
4.Favourable social security regime
For the manager, the 10% employee contribution(9) introduced in 2025 – a final, flat levy, and therefore far more favourable than ordinary social security contributions – initially applied to the entire portion of the gain taxed as employment income: the 2026 Social Security budget(10) now restricts it to qualifying securities only.
For the employer, this social security regime also remains favourable, with no employer contributions whatsoever on MP gains, including on the excess portion for qualifying securities. This is a significant advantage compared with the 30% employer contribution payable on the acquisition gain from free shares and stock options.
Lastly, making this social security regime permanent (it was initially limited to 31 December 2027) secures this competitive advantage for the long term, particularly for non-qualifying MPs.
5.Contribution-and-sale and MPs: a double whammy
On 7 May, the Conseil d’État(11) applied the management package regime once again, this time in a contribution-and-sale (apport-cession) context.
The facts
The taxpayer, an individual, had contributed all of his shares in the operating company to a holding company that he controlled and managed; the holding company then sold those shares in a classic contribution-and-sale transaction.
The tax authorities reassessed the portion of the proceeds generated by these transactions corresponding to the value of the preference shares subsequently contributed to the holding company. They held that this portion did not constitute a capital gain on securities taxable at 12.8%, but additional remuneration, recharacterised as earned income taxable as employment income at progressive rates of up to 45%, and subject to the high-income surtax.
On the taxpayer’s application, the Paris Administrative Court, and then the Paris Administrative Court of Appeal, on appeal by the tax authorities, set aside the reassessment.
The Conseil d’État decision
In setting aside the reassessment, the Court of Appeal held, first, that the contribution could not be regarded as an act of disposal by which the taxpayer had waived his right to sell and, second, that because of the tax rollover on the contribution gain, the gain could only have been realised upon the subsequent sale by the holding company.
Nevertheless, the Conseil d’État quashed the Court of Appeal’s judgment for error of law, criticising it for failing to examine whether the contribution gain at the taxpayer’s disposal – equal to the difference between the value of the securities used for the contribution (exchange) and the price he had paid for them – should be regarded as earned in return for his duties as executive / employee.
Given the conditions under which the transaction was carried out – and echoing the wording of the official tax guidelines (BOFiP) commenting on Article 93 of the 2025 Finance Act, which introduced the new regime – the court held that the gain must be regarded as consideration for the executive duties performed within the company, and not as the normal return on an investment. The gain therefore constitutes income taxable as employment income, deemed realised and available as from the year of the sale (the contribution being a form of sale). Neither the fact that the consideration for the transaction took the form of securities rather than cash, nor the application of the tax deferral or rollover to the gain on the contribution of securities, prevents this characterisation.
Difficulties ahead where the holding company has already reinvested
This case law raises a number of difficulties.
In particular, how will the taxpayer (an individual) pay the reassessment if, by the date of the reassessment, the holding company has already reinvested on a long-term basis (by reinvesting in a business activity within the 36 months required by law to benefit from the tax rollover, i.e. at least 70% of the sale price)? By distributing to himself the balance of the sale price not subject to reinvestment, i.e. 30%? That amount would probably be far from sufficient to fund the reassessed income tax at progressive rates, the CSG, or even social security contributions.
What will become of the tax rollover crystallised in the hands of the contributor, an individual, at the time of the contribution to his holding company?
Risks of double, or even triple, taxation are looming, possibly with many cases to come, given how common the contribution-and-sale technique is among individual shareholders.
Translated from the French. Original article: Daf magazine – No. 69 – September 2026, pp. 50-51 – www.daf-mag.fr
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(1)Article 93 of the 2025 Finance Act (Law No. 2025-127 of 14 February 2025).
(2)Article 163 bis H, I of the French General Tax Code (CGI).
(3)Law No. 2026-103 of 19 February 2026.
(4)Article 163 bis, II of the CGI, as amended (amended by Article 24, I-D-2°-a of the Law).
(5)New Article 163 bis H, IV-C of the CGI.
(6)The portion of the gain already existing at that date which is below three times the financial performance ratio, and which falls under the capital gains regime, will itself automatically benefit from the tax deferral (sursis d’imposition) under Article 150-0 B or the tax rollover (report d’imposition) under Article 150-0 B ter of the CGI, which applies automatically in the event of a restructuring.
(7)Article 163 bis H, IV-C-2 of the CGI.
(8)Article 163 bis H, I, last paragraph of the CGI, as amended by Article 24, I-D-1°-b of the Law.
(9)10% employee contribution payable only on the portion of the gain exceeding the capital gains taxation cap.
(10)Article L. 137-42 of the French Social Security Code, as amended by Article 17 I-2° of the 2026 Social Security Financing Act (LFSS 2026).
(11)Conseil d’État (French Supreme Administrative Court), Joint Chambers, 7 May 2026, No. 493083.
