In three decisions issued on July 13, 2021, the Conseil d’Etat ruled on the tax regime for gains obtained under a management package.

The Conseil d’Etat has ruled that the gains from a management package are taxable as a salary, if they are linked to the performance of the duties of an employee or manager.

1) Facts

Several executive-manager employees have benefited from the "management package" system, allowing them to acquire shares in return for their involvement in the company and their performance illustrated by internal company returns.

All "management package" arrangements are not regulated by law, in particular "autonomous share subscription warrants" and "stock option contracts".

Following various checks, the tax administration questioned the taxation of the net gain arising from the sale of these shares, in the category of capital gains on the sale of securities.

Indeed, the tax administration considers that this gain should be taxed in accordance with the rules governing the "salaries and wages" category, with regard to Articles 79 and 82 of the General Tax Code.

However, the administrative courts of appeal of Versailles and Paris do not accept all the analysis offered by the tax authorities, judging in particular that "the difference observed between the sale price of the shares, four days after the lifting of the purchase option, and the price fixed in the agreement of June 27, 2007 for the exercise of this option, was not in the nature of a taxable benefit in the category of salaries and wages, but rather constituted a gain in taxable capital as capital gain on disposal ”, more favorable to the beneficiaries.

This is why, in judgment n ° 428506 which particularly holds our attention, the tax administration appealed to the Conseil d’Etat on the basis of article 79 of the general tax code which provides that " salaries, allowances, emoluments, salaries, pensions and life annuities contribute to the formation of the overall income serving as the basis for income tax ”and on the basis of article 82 of the same code which specifies that“ for the determination of the tax bases, account is taken of the net amount of salaries, allowances and emoluments, salaries, pensions and annuities, as well as all benefits in money or in kind granted to those concerned in addition to salaries, indemnities, emoluments, actual salaries, pensions and annuities ”.

2) Means

In the judgment n ° 428506, the tax administration, in particular, criticizes the judgment of the administrative court of appeal of not having considered the gains obtained thanks to the particular systems of BSA and COA of management package, under the tax regime linked to the "salaries and wages" category, but to that of "capital gain on transfer of securities", having regard to the circumstance that the purchase option granted would have been linked to the execution without impact of the employment contract.

In this regard, it was argued that the benefit derived from stock options or stock subscription warrants, “when it derives essentially from the exercise by the person concerned of his managerial functions or employee, has [therefore] the character of an advantage granted in addition to the salary ”in application of articles 79 and 82 of the general tax code.

The same applies when a taxpayer exercises a stock option: in fact, according to the tax authorities, the difference between the real value of these shares on the date of exercise of this option and their price. purchase increased by the amount paid to acquire this option, constitutes a gain when it finds, once again, essentially its source in the exercise by the person concerned of functions of manager or employee, and is therefore taxable in the category of salaries and wages.

In judgments n ° 435452 and n ° 437498, while in the first, the senior executive employee who appealed in cassation argues that the initial value of his vouchers was particularly low to be considered as an advantage, in the second instead, employees argue that the gain made did not represent the consideration for their managerial function.

3) Are gains from stock options and stock warrants as part of a management package taxable in the “salaries and wages” category once they have been obtained? in return for the exercise of salaried functions? Yes, answers the Conseil d’Etat

The Conseil d’Etat replied in the affirmative on the basis of Articles 79 and 82 of the Tax Code.

In judgment n ° 428506, the Conseil d’Etat annuls the decision of the administrative court of appeal of Versailles which considered that the exercise of the purchase option by the executive officer constituted a taxable capital gain as capital gain on disposal, having merely noted that the employee was not protected against the risk of a total loss of his investment.

Against this solution, the Conseil d’Etat, on the contrary, considered that these earnings were taxable in the "wages" category, because the option to purchase granted was linked to the employment contract.

Likewise, in judgment n ° 437498, the Conseil d’Etat annulled the decision rendered by the administrative court of appeal of Paris on the grounds that the gains made should not be regarded as an additional salary simply because the beneficiary had the guarantee of being able to resell his share subscription warrants to the company at prices fixed in advance.

Against this guarantee, the judges of the Conseil d’Etat insisted on the conditions under which the gains were obtained, and which must constitute a counterpart of the functions of leader in order to be able to be taxed as a salary supplement.

Finally, in judgment no. 435452, the senior executive's appeal was dismissed, because the administrative court of appeal had exactly inferred that the gains obtained resulted from the results and performance of his professional engagement.

In these three judgments, the Conseil d’Etat, in order to justify its decisions, notes above all that the subscription, the acquisition of stock options or, of stock warrants, constitute above all , benefits when they “have been acquired or subscribed at a preferential price with regard to their real value on the date of this acquisition or subscription”.

More particularly, the Conseil d’Etat considers that “such an advantage, when it finds its source essentially in the exercise by the person concerned of his functions of manager or employee, has the character of an advantage granted in addition to the salary ".

It is to this extent that, being advantages, these specific management package systems therefore constitute additional salary which must therefore be taxable in the “salaries and wages” category, although the subscription warrants of shares are in principle taxable in the “capital gain on transfer of securities” category.

In fact, the Conseil d’Etat first establishes the conditions of the transfer which are determined or not, by an employment contract which requires the executive manager employee to carry out this transfer in return for a share subscription warrant. .

In this regard, the Conseil d’Etat specified that “the qualification of taxable capital gain under the capital gains regime on the sale of securities must, in particular, be ruled out when the person concerned has benefited from a mechanism for him. guaranteeing, from the outset or subsequently, the sale price of these warrants under conditions constituting consideration for the performance of his duties as manager or employee ”.

Consequently, the gains obtained from a management package in the form of stock options or stock warrants are taxable in the “salaries and wages” category as long as they are strictly consecutive. to the performance of the functions of employee or manager, even if this form of taxation would be less favorable to those taxable according to them.



Frédéric CHHUM, Avocat à la Cour et Membre du Conseil de l’ordre des avocats de Paris (mandat 2019-2021)

Sarah BOUSCHBACHER juriste

CHHUM AVOCATS (Paris, Nantes, Lille)
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