The war lasted for 8 months. This February 5, the State Council decided. Business Creator Share Subscription Warrants (BSPCE) are eligible for tax deferral. This is a mechanism that allows taxation of gains generated by the contribution of securities to be deferred until the shares are actually resold by their holders. BSPCEs are types of stock options that can be allotted by companies with less than 15 years of existence to their employees, managers and directors.
Tax deferral is applied for example when a start-up is bought through a leveraged buy-out (LBO, also called a leveraged buyout). An exchange of securities is often requested to reduce the transaction cost for the buyer. In this scheme, the tax deferral allows the share holders of BSPCE to reinvest an amount equivalent to the value of all their securities in the new company, without first liquidating them and paying 30% tax and withholdings. Social on hypothetical added value. Indeed, since the operation involves a simple exchange of shares for the employee-shareholder, it does not generate liquidity for him.
A controversial reading of the tax code
In May 2023, the Directorate General of Public Finance (DGFIP) caused an earthquake by publishing comments in its official Bulletin of Public Finance (Bofip), which clearly excluded securities resulting from the exercise of BSPCEs from the benefit of tax deferral. “Gain resulting from contribution of securities received in exercise of BSPCE does not benefit from tax deferral mechanism. This benefit will be taxed for the year of contribution in accordance with the provisions of article 163 bis G of the CGI,” wrote the Tax Administration.
The administration supported its position by the fact that article 163 bis G of the General Tax Code (CGI), which introduces the taxation applicable to BSPCE, does not expressly refer to article 150-0-B of the CGI. It is the latter that defines tax deferral. Article 163 bis G of the General Tax Code refers only to article 150-0 A of the CGI.
For Pierre Bonamy, associate lawyer at Reinhardt Marville Torre (RMT) firm, Damien Basson, associate lawyer at INLO Advocates and independent associate lawyer Florent Ruault, the argument lacked logic. For him Article 150-0 is a comprehensive article, which can be properly understood only by reading the following articles. As a result, at the end of July, they filed an appeal to the Council of State exceeding their authority to overturn Bofip’s comments. They also supported their approach by the fact that the legislator, by creating the BSPCE, wanted to streamline their tax system.
Decision of the Council of State
Following the opinion of the public report released a few weeks ago, the Council of State agreed with the lawyers. In particular, he ruled on an appeal by the RMT firm. “It follows from the provisions of article 163 bis G of the General Tax Code, informed by the preliminary work of the financial law of December 30, 1997 for 1998, from which it comes (…), that the legislator intends to submit. For capital gains on the transfer of transferable securities provided for in Article 150-0 A et seq. of the Uniform Code, the business creator under the general law regime receives net on the transfer of securities subscribed to the exercise of share subscription warrants”, can we read in the decision of the Council of State That “Les Ecos” was able to consult.
Result, “In the event of contribution to a company not controlled by the contributor of the securities subscribed to in the exercise of such warrants, the gain from this contribution is not immediately taxable but benefits from tax deferral provided by the provisions of section 150. -0 B of the General Tax Code,” it continues. The Council of State therefore annuls the administration’s comments. It orders the State to pay the sum of 3,000 euros for unreimbursed costs.
This decision of the Council of State concerned only the tax suspension which was at the heart of the tax doctrine. However, the same arguments can be applied to tax deferrals. This mechanism allows a family to structure its wealth through a family holding company without paying tax when securities are transferred.
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