End of the Tax Deferral for Entrepreneurs Holding a BCPCE Certificate

Already affected by the tightening of liquidity due to rising central bank interest rates, startups risk losing some of the tax benefits associated with BSPCEs (Bons de Souscription de Parts de Créateur d’Entreprise). These BSPCE, similar to stock options, allow employees to purchase shares at a discount and resell them for a profit, in exchange for lower compensation.
 

Partial Revocation of the Tax Deferral

Until now, BSPCE shares were eligible for a tax deferral during contribution-and-transfer transactions, allowing employees to reinvest without having to pay taxes immediately. However, Section 25 of the new finance law changes this arrangement by distinguishing between gains upon exercise and gains upon sale, as is the case with bonus shares and stock options. This strips BSPCE of a large part of their competitive advantage.
 

Impact on Employees

Gains realized during the year will now be taxed at the time the securities are contributed, while gains from the sale of securities will continue to benefit from a tax deferral. This distinction is justified by the nature of the gain realized during the year, which is treated as salary income. This could create inequalities among employees, as some may have to sell their securities to pay the tax.
 

Impact on Buyers

The new rule could also disrupt startup acquisitions, as shares issued from reinvested BSPCEs represent a reduction in the cash available to close the transaction. In some startups, BSPCEs can account for up to 20% of the capital, which could reduce the cash available for the acquisition by 10 to 15%.
 

Invalidity of the Council of State's Decision

This article of the Finance Bill overturns a February 2024 decision by the Council of State, which had confirmed the eligibility of the tax deferral for BSPCEs. Members of Parliament adopted this article on November 8, 2024, along with a relaxation of the rules regarding the inclusion of securities derived from BSPCEs in a PEA, though this remains uncertain. The tax distinction between capital gains on sale and capital gains upon exercise will apply to transactions carried out on or after October 10, 2024.

It is crucial to note that the date to be considered is the date the articles of incorporation or contribution agreement was signed, in order to avoid legal complications.