Management package: a revolution in the taxation of managers and founders underway?

For several years, the fiscal uncertainty surrounding management packages has sparked concern and debate. The Finance Act for 2025, recently passed, introduces a new tax regime designed to provide more security for entrepreneurs and executives benefiting from MIP (Management Incentive Plans). But is this reform truly an adequate response? Let’s take a closer look at the changes and their implications.

A Context of High Fiscal Insecurity

Management packages are essential tools in private equity, aligning the interests of managers and investors. However, their tax and social security classification has been a subject of controversy for over ten years.

Indeed, the jurisprudence from the Conseil d’État of July 13, 2021 has increasingly led to the reclassification of gains as employment income rather than as capital gains, resulting in heavier taxation and increased tax audits. In the absence of an official doctrine on the subject, the risks for beneficiaries of MIP and management packages have become significant.

It is in this context that the Finance Act for 2025 introduces a new tax regime aimed at clarifying the taxation rules.

A Structuring Tax Reform for Management Packages

Which Gains Are Concerned?

The new Article 163 bis H of the General Tax Code (CGI) draws an important distinction:

Gains related to executive or employee functions will be taxed as employment income beyond a certain threshold.

Gains from a "pure" investment, with no substantial link to the functions performed, will benefit from the capital gains regime.

This approach aims to better differentiate labor compensation from capital risk-taking.

A Taxation Threshold Based on Financial Performance

Capital gains arising from a management package will be subject to variable taxation based on the company's performance:

Up to 3× the initial investment valuation, the gain will be taxed as a capital gain on disposal (with a maximum rate of about 34%).

Beyond this threshold, the excess portion will be taxed as salaried income (with a maximum rate of 49%), plus an additional liberatory social contribution of 10%.

This mechanism introduces better fiscal predictability, but still raises some questions.

What Happens to Existing MIP and Packages?

A Regime Applicable Only to Future Transactions

One of the key points of this reform is its scope limited to future transactions. This means that:

Contracts already in place and settled will not be affected by the new law.

Only ongoing packages, which have not yet been finalized, may be subject to this new tax framework.

The fiscal risk remains for past transactions, which continue to be governed by the previous rules and the 2021 jurisprudence.

Uncertainties to Be Clarified

Several questions remain open, including:

The treatment of share donations: Taxation will occur at the time of disposal by the donee, but further details are expected regarding the coordination with transfer duties.

The application to successive LBOs: How can double taxation be avoided when partial resales have already taken place?

The position of the tax administration: Clarification via the Official Bulletin of Public Finances (BOFiP) is anticipated to avoid further uncertainties.

Conclusion: A Step Forward, But With Areas of Ambiguity

The reform introduced by the Finance Act for 2025 is undoubtedly a step forward in securing management packages. By establishing a clearer framework, it reduces the risk of complete reclassification as employment income. However, some key issues remain unresolved, and further administrative clarifications are awaited.