BSPCE (Employee stock options): contributed shares issued upon exercise of BSCPEs now subject to exercise gain tax when contributed

The French Finance Act for 2025 abolishes the deferral of taxation on gains from the exercise of BSPCEs (Employee stock options). From 1 January 2025, this gain – corresponding to the difference between the exercise price of the BSPCEs and the market value of the shares – will be taxed immediately on contribution, even if there is no cash. Until now, this arrangement enabled beneficiaries to defer taxation until the shares were resold. Its abolition risks limiting managerial shareholding via reinvestment and affecting the structuring strategies of growing companies.

Principle of BSPCEs: particularly used by start-ups and SMEs, BSPCEs enable their holders, whether employees or corporate officers, to subscribe for shares in their company for several years at a price corresponding to their market value at the time the BSPCEs were granted. When the BSPCEs are resold at a later date, the holder receives the capital gain corresponding to the increase in value that has occurred in the meantime. Until now, if the company was bought out, the holder of shares resulting from the exercise of BSPCEs could contribute the shares to the acquiring company or to a personal holding company, benefiting from deferred taxation until the exit (sale of the shares concerned for cash), thanks to a legal mechanism for deferring/deferring taxation.

What changes: the Finance Act for 2025 abolishes this deferral mechanism for the exercise gain. This gain corresponds to the difference between the exercise price set when the BSPCEs were granted and the market value of the share on the day the BSPCEs are exercised.

As a result, BSPCE holders will be taxed when they contribute their shares, even though they do not have the cash consideration to pay this tax. Some will therefore be forced to forego at least part of the reinvestment in order to finance the tax.

Please note: this measure would apply to exercise gains made from 1 January 2025, including BSPCEs granted before that date.

In this respect, it is similar to the rules applicable to free shares. Admittedly, the contribution of shares arising from BSPCEs is not frequent, but this new rule could lead to a damaging decline in manager shareholding in growth companies.