The gain a manager realises on LBO securities may be taxed as a capital gain or recharacterised as salary, with decisive consequences in case of international mobility.
On a leveraged buyout, a manager or key executive is offered the chance to invest in the securities of the company they run, through an incentive mechanism, in the hope of realising, on exit, a substantial capital gain. Where the operation succeeds, the gain may reach several times the initial stake. A decisive tax question then arises: does this gain fall within the favourable regime of capital gains on the disposal of securities, or must it be recharacterised as employment income, by reason of its link with the functions exercised? The answer, which determines the applicable rate and social contributions, is the subject of recent legislation and exacting case law.
The question has an international dimension too often overlooked. For a mobile manager, expatriated before or after the operation, the characterisation of the gain governs which State may tax it: a capital gain and a salary are not treated the same way by tax treaties, and recharacterisation may shift the taxation from one State to another. In a context of increasingly cross-border structuring of leveraged operations, the stake goes beyond the domestic rate and touches the very allocation of the right to tax.
We first present the principle of the capital gain and its function-based exception, together with the new statutory regime (I), then the trap of the contribution-disposal and the tax deferral recently brought to light (II), before turning to the international dimension and the securing of these operations (III).
I. Capital gain or salary: the principle and its exception
A. The capital gain principle and the new regime of article 163 bis H
Gains derived from the disposal or contribution of securities fall, in principle, within the regime of capital gains on the disposal of securities provided for in article 150-0 A of the French General Tax Code (CGI), including where they result from the appreciation of the securities of a company of which the taxpayer is a manager or employee. The status of investor then prevails, and the gain benefits from the capital gains regime, subject to the flat tax or, on election, the progressive scale. This principle long underpinned the attractiveness of management packages, designed precisely to allow managers to share in value creation on favourable tax terms.
A recently established statutory framework. Drawing the consequences of abundant case law, the legislature established, by Law no. 2025-1403 of 30 December 2025 (art. 17) and then Law no. 2026-103 of 19 February 2026 (art. 24), a specific regime codified in article 163 bis H of the CGI. This regime covers gains realised on securities subscribed or acquired by employees or managers in connection with the functions exercised. Its structure rests on a principle and an exception: by default, the net gain is taxed as salary; however, where the securities meet conditions relating in particular to a risk of capital loss and a holding period of at least two years, a fraction of the gain may be taxed under the capital gains regime, up to a ceiling equal to three times the ratio between the issuing company's real value at the date of disposal and its real value at the date of acquisition or subscription of the securities. The portion exceeding that ceiling may, subject to conditions, benefit from a deferral mechanism intended to facilitate reinvestment.
B. The exception: the gain acquired in consideration of functions
The exception to the capital gain principle is the heart of the dispute. It is otherwise with the favourable regime where, having regard to the conditions of realisation of the gain, it must be regarded as acquired not by reason of the transferor's status as investor, but in consideration of their functions as manager or employee. In that case, the gain is taxable in the category of employment income, on the basis of articles 79 and 82 of the CGI, with the consequences that attach to this characterisation as to rate and social contributions. Case law has developed an analytical grid distinguishing, according to the circumstances, the gain that remunerates a genuine investor's risk from that which constitutes, in reality, a supplement to the remuneration of work.
The indicia of consideration for functions. The court examines a body of factors: the existence and reality of a capital risk actually borne by the manager, the advantage granted on subscription relative to the real value of the securities, the liquidity and exit conditions linked to presence in the company, or the leverage guaranteed by the structuring. Where the gain stems less from an investor's hazard than from the function exercised and the manager's personal performance, recharacterisation as salary is required. This analysis, eminently factual, explains the insecurity that long surrounded these operations and that the new statutory regime has only partly dispelled.
II. The contribution-disposal: the trap of tax deferral
A. The recharacterisation of the contribution gain as salary
A widespread practice consists, for the manager, in contributing their securities to a personal holding company subject to corporate income tax shortly before their disposal, in order to place the capital gain under a deferral regime and thus postpone the taxation. Recent case law has dealt a severe blow to this practice where it concerns management package securities. In a case where a manager had, on an LBO, acquired securities through an interposed company, then contributed those securities to a company subject to corporate income tax under the deferral regime, before the disposal occurred two days later, the Conseil d'État held that the contribution itself had generated, in the taxpayer's hands, a gain equal to the difference between the value of the securities retained for the exchange and their acquisition price.
This gain, which the manager had at their disposal from the contribution, may be characterised as employment income if it is acquired in consideration of functions. The fact that the consideration for the contribution consisted of securities and not cash, like the application of the deferral, is without effect on the characterisation and availability of this gain. The court of remand will have to say whether, in the circumstances of the case, the latent gain noted on the contribution to the personal holding, a few days before the unwinding of the operation, can be characterised as a gain realised in consideration of the manager's functions.
B. Deferral inoperative
Two major lessons emerge from this solution. On the one hand, the deferral of article 150-0 B of the CGI is not applicable to a gain taxable in the category of employment income: the deferral mechanism, designed for capital gains, cannot neutralise salary income. The same analysis appears transposable to the deferral of article 150-0 B ter, frequently used in contribution-disposal operations. The manager who believed they had deferred their taxation is therefore reassessed immediately, on a gain they thought protected by the deferral.
A parallel to draw with caution. On the other hand, recharacterising a contribution gain as salary does not necessarily require the authorities to resort to the abuse-of-law procedure: a reassessment that merely recharacterises income, without discarding any act as not being opposable to it, may be implemented through the ordinary adversarial procedure. The Conseil d'État so held on 8 November 2024, in a different context, that of denying beneficial-owner status for dividends (CE, 9th and 10th chambers combined, no. 471147, Foncière Vélizy Rose): a court that merely finds the absence of that status, without discarding any act, does not implicitly resort to article L. 64 of the tax procedure code. This principle has not, to date, been affirmed by the Conseil d'État in the specific context of gains on the contribution of management package securities, and the judgment of 7 May 2026 on which the present analysis rests does not address this point. Caution therefore recommends not treating it as definitively settled in this context.
III. The international dimension and securing the operation
A. Salary or capital gain: two distinct treaty treatments
For a manager in international mobility, the characterisation of the gain determines not only the domestic regime, but which State may tax it. Tax treaties indeed treat salary income and capital gains on securities differently. Salary remuneration is in principle taxable in the State where the activity is exercised, under the OECD Model Convention, whereas capital gains on the disposal of securities are most often taxable in the transferor's State of residence alone at the time of disposal. The recharacterisation of a capital gain as salary may therefore shift the right to tax from one State to another, with substantial consequences for the manager who has changed residence between the acquisition of the securities and their disposal.
An allocation-of-taxing-rights stake. Take the case of a manager who exercised their functions in France when the package was set up, then transferred their residence abroad before exit. If the gain is characterised as a capital gain, it will in principle fall to their State of residence at disposal; if it is recharacterised as salary attached to the activity exercised in France, France may claim the right to tax it by reason of the activity that is its source. The reverse symmetry holds for the manager who has come to settle in France. This dimension, which requires articulating domestic law, the characterisation of the gain and the applicable treaty, is decisive and must be analysed from the design of the package, not at the time of exit.
B. Practical recommendations: characterise, structure, anticipate mobility
Characterise the gain from the outset under the new regime. The first precaution is to analyse, from the setting up of the package, whether the expected gain will fall within the capital gain or salary regime in the light of article 163 bis H, by verifying the conditions of capital risk, holding period and ceiling linked to the company's performance. This characterisation, anticipated and documented, conditions the predictability of the tax charge and avoids the unpleasant surprise of a recharacterisation on exit.
Handle the contribution-disposal with caution. Given the recent case law, the use of the deferral to postpone the taxation of a management package gain must be handled with extreme caution. The deferral does not protect a gain taxable as salary, and the authorities may recharacterise without abuse of law. Before any contribution to a personal holding, it is indispensable to analyse the real nature of the gain and the availability the contribution entails, on pain of an unanticipated immediate taxation.
Integrate international mobility into the structuring. Where the manager is likely to change residence between acquisition and disposal, the characterisation of the gain and its treaty treatment must be analysed upstream. The timing of the operation, the moment of the change of residence and the articulation with the exit tax must be coordinated. We assist managers and funds in designing secured management packages, integrating the characterisation of the gain, the handling of tax deferrals and the international dimension of the beneficiaries' mobility.
Conclusion
The taxation of management packages has hardened and clarified at once. The principle remains that of the capital gain, but the exception based on the gain acquired in consideration of functions, now framed by a specific statutory regime, frequently leads to taxation as employment income. Recent case law has, moreover, closed an optimisation route by holding that the contribution of securities to a holding under deferral does not protect a gain taxable as salary. The principle that such a recharacterisation does not necessarily require resort to abuse of law finds support, in a different context, in the Conseil d'État's judgment of 8 November 2024 (no. 471147), without having to date been affirmed in the management package context.
Our conviction is that the security of a management package is decided at its design, by an anticipated characterisation of the gain and a coherent structuring, and not at exit, when room for manoeuvre is exhausted. For managers in international mobility, this analysis must imperatively integrate the treaty dimension, the salary-or-capital-gain recharacterisation being capable of shifting the right to tax from one State to another.
Our recommendation is clear: have the expected gain of your package characterised from its inception in the light of the article 163 bis H regime, handle the contribution-disposal with caution, and anticipate the consequences of a change of residence on the treaty treatment of the gain. The taxation of value sharing is prepared, not retrieved.
Frequently asked questions
Will my management package gain be taxed as a capital gain or as salary?
In principle as a capital gain (CGI, art. 150-0 A), but it is recharacterised as employment income where it is acquired in consideration of your functions as manager or employee, and not of your status as investor. The new regime of article 163 bis H now lays down the principle of taxation as salary, with a fraction taxable as a capital gain where the securities meet conditions of capital risk and holding period, up to a ceiling linked to the company's performance. The characterisation depends on the concrete conditions of the operation.
Does contributing my securities to a holding allow the tax to be deferred?
Not for a gain taxable as salary. Recent case law holds that the contribution of management package securities to a personal holding generates a gain the manager has at their disposal, and that the deferral of article 150-0 B does not apply to a gain taxable as employment income. The same analysis appears transposable to the deferral of article 150-0 B ter. The manager may therefore be taxed immediately, on a gain they thought deferred, which requires the greatest caution before any contribution.
Must the authorities invoke abuse of law to recharacterise my gain?
Not necessarily. The Conseil d'État held, in a different context, that of denying beneficial-owner status for dividends (CE, 8 November 2024, no. 471147), that a reassessment merely recharacterising income, without discarding any act as not being opposable to it, may be implemented through the ordinary adversarial procedure, without recourse to the abuse-of-law procedure. This principle has not, to date, been affirmed by the Conseil d'État for management package gains: the judgment of 7 May 2026 addressed in this article does not rule on the point, and caution recommends not treating it as definitively settled in this context.
What is the impact of expatriation on the taxation of my package?
It is decisive. Tax treaties treat salaries differently, taxable in principle in the State where the activity is exercised, from capital gains on securities, most often taxable in the State of residence alone at disposal. The recharacterisation of a gain as salary may therefore shift the right to tax to France if the activity was exercised there, whereas a capital gain would fall to your State of residence on exit. The timing of the change of residence and the articulation with the exit tax must be analysed from the design of the package.