French Labour law - Management package for executives: earnings are taxable as a salary if they are linked to the performance of duties (Conseil d’Etat, July 13rd, 2021, n ° 428506, n ° 437498, n ° 435452)
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.
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 ”.
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- Conseil d'Etat : Management package des dirigeants de société : les gains obtenus doivent être imposés comme un salaire s'ils sont liés à l'exercice des fonctions
- CE, 13 juillet 2021, n°428506
- CE, 13 juillet 2021, n°437498
- CE, 13 juillet 2021, n°435452
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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