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BSPCE and Exit Tax: Common Pitfalls for Startup Founders

Article 167 bis of the French Tax Code (CGI) establishes a targeted regime for the taxation of unrealized capital gains on certain securities and corporate rights upon the transfer of one's tax domicile out of France. It provides for two distinct payment deferral regimes: an automatic deferral, operating by force of law, under its paragraph IV, where the conditions set out in that paragraph are met (by reference in particular to the bilateral treaties in force and to the list of non-cooperative states and territories within the meaning of article 238-0 A CGI), and an optional deferral under its paragraph V, governed in particular by Decree No. 2019-868 of 21 August 2019, which as a general rule requires the proposed security to be filed no later than 90 days before the transfer. Determining which regime applies to a move to a given country — notably the United Arab Emirates — calls for a case-by-case analysis.

In brief — Article 167 bis CGI

Article 167 bis CGI applies, under the conditions it sets out, to the transfer of one's tax domicile out of France where the taxpayer holds shareholdings reaching the thresholds set by that statute (in particular a holding of at least 50% of a company's profits, or a portfolio of securities worth more than EUR 800,000), and where the prior-residence conditions in France are met. The tax assessed on unrealized capital gains, on claims arising from an earn-out clause, and, where applicable, on deferred capital gains, is computed under the rules in force on the date of the transfer. The payment deferral is structured under paragraphs IV (automatic) and V (optional) of article 167 bis CGI, the applicability of which to a given destination calls for a case-by-case analysis. Filing obligations — in particular the submission of the 2074-ETD return — apply throughout the entire deferral period.

A growing category of securities, with specific rules

BSPCE (founder share subscription warrants) have established themselves over the past ten years as the preferred instrument for granting equity to employees and executives of French startups. They are subject to a specific tax regime (article 163 bis G CGI), distinct from the general regime applicable to stock options and free shares. When the beneficiary plans to move abroad after exercising them, two tax regimes come into collision: the specific BSPCE regime and the exit tax regime (article 167 bis CGI).

Scope of the exit tax on BSPCE-derived securities

Securities acquired through the exercise of BSPCE fall within the scope of the exit tax in the same way as any other security representing a shareholding, provided the taxpayer holds them on the eve of the transfer and the assessment thresholds are met (50% holding OR EUR 800,000 in aggregate value, after combining them with the other securities held).

The deemed-disposal fiction applies: on the eve of the transfer, the taxpayer is deemed to have sold their securities at their market value, and the corresponding unrealized capital gain is taxed. The optional deferral under paragraph V (for a move to Dubai) remains available.

Determining the acquisition price: the classic pitfall

This is where the most common mistake lies. Many BSPCE beneficiaries assume that the acquisition price to be used to compute the unrealized capital gain corresponds to the nominal exercise price of the warrants. That is not the case. For securities derived from the exercise of BSPCE, the acquisition price to be used to compute the unrealized capital gain corresponds to the subscription price actually paid at the time of exercise — that is, the amount actually paid to subscribe for the shares, at a price generally set by the BSPCE when it was granted.

This clarification is essential: it avoids using an incorrect acquisition price that could lead either to overstating the unrealized capital gain (using the nominal exercise price as the acquisition price) or to understating it (wrongly including the acquisition gain).

Interaction with the prior acquisition gain

The specific BSPCE regime provides that the acquisition gain (the difference between the value of the securities on the day of exercise and the exercise price) is taxed under a particular regime at the time of the actual disposal. For BSPCE granted before 1 January 2018, this gain is taxed at 19% (raised to 30% where the holding period is less than 3 years). For BSPCE granted after that date, the 12.8% flat tax applies to the acquisition gain.

For exit tax purposes, this acquisition gain is not taxed again: it is treated as already vested and already addressed for tax purposes. The unrealized capital gain subject to the exit tax covers only the portion of the gain accruing after exercise — that is, the difference between the market value on the day of the transfer and the value of the securities on the day of exercise (which equals the acquisition price used).

Worked numerical example

Assumption: a senior executive received in 2020 a BSPCE entitling them to subscribe for 10,000 shares at a unit exercise price of EUR 2. In 2024, they exercise the BSPCE when the value of the securities is EUR 50 per share. In 2026, they transfer their residence to Dubai when the value of the securities is EUR 100 per share.

If the executive holds these 10,000 securities in addition to other significant shareholdings, and the thresholds are crossed, the exit tax on this unrealized capital gain will amount to 500,000 × 31.4% = EUR 157,000.

Common mistakes

Practical recommendations

Preparing a move to Dubai for a BSPCE holder calls for a dedicated audit. Three points deserve particular attention: documenting the actual subscription price (invoices, bank certificates, proof of payment), retaining the BSPCE documentation (the initial warrant, the exercise terms, the company's communications), and securing the prior acquisition gain (evidence of the tax filing at the time of exercise).

For holders of BSPCE not yet exercised on the eve of departure, the strategy changes: these rights are not within the scope of the exit tax, but their subsequent exercise (from abroad) carries its own tax consequences, depending on the bilateral treaty and the tax regime of the taxpayer's state of residence on the day of exercise. For a UAE resident, the 1989 France-UAE treaty and the absence of a personal income tax in the UAE create a complex interaction that warrants a dedicated audit.

Frequently asked questions

Is the exercise price of my BSPCE the acquisition price used for the exit tax?

No. The acquisition price to be used is the subscription price actually paid at the time the BSPCE is exercised. This avoids combining the taxation of the acquisition gain (already taxed) with the taxation of the unrealized capital gain (exit tax).

Are my unexercised BSPCE within the scope of the exit tax?

No. The exit tax applies only to securities actually held on the eve of the transfer. Unexercised BSPCE are rights, not securities. Their subsequent exercise, from abroad, follows its own tax regime, which depends on the applicable bilateral treaty.

If I exercise my BSPCE shortly before departure, is this considered tax optimization?

Not in itself. Exercising before departure triggers the acquisition gain (taxed under the BSPCE regime) and brings the securities into the potential taxable base of the exit tax. This may be preferable or disadvantageous depending on the figures: an individual audit is essential. Be mindful of timing: an exercise too close to departure may be analyzed from the standpoint of abuse of law (article L. 64 LPF).

Frequently asked questions

Article 167 bis of the French Tax Code (CGI) establishes a targeted regime for the taxation of unrealized capital gains that applies, upon the transfer of one's tax domicile out of France, to certain categories of assets — essentially corporate rights, securities or rights of a similar nature, earn-out claims and, where applicable, deferred capital gains. The regime requires the members of the tax household to hold, directly or indirectly, a holding of at least 50% of the profits of a company subject to corporate income tax, or for the aggregate value of the corporate rights, securities or rights to exceed EUR 800,000. Form 2074-ET, together with form 2042-C, is filed with the income tax return for the year of the transfer. The interaction with a move to the United Arab Emirates of the deferral regimes provided under paragraphs IV and V of article 167 bis calls for a specific analysis of the provisions in force on the date of the transfer, paragraph V opening an optional deferral, conditional on an express application and on the provision of security within the procedural framework set out in particular by Decree No. 2019-868 of 21 August 2019.
Yes. Shares or units of a SARL, EIRL, SCI, or any opaque French structure trigger the exit tax upon a change of domicile. Even if the SARL has no realized unrealized capital gain, the difference between your acquisition price and the net asset value is taxable. Holding structures or chains of shareholdings must be reported in full.
Yes. Article 167 bis CGI provides for an automatic payment deferral (paragraph IV) for moves to an EU or EEA state that has entered into a recovery assistance agreement with France, and for an optional deferral upon application (paragraph V) for other destinations, including the United Arab Emirates. This optional deferral requires security (bank guarantee, mortgage, pledge) and the designation of a fiscal representative accredited in France. The tax remains assessed; actual payment is deferred until the sale, buyback, redemption or cancellation of the securities.
Failure to report exposes you to a reassessment of the tax on unrealized capital gains, together with the standard penalties: late-payment interest at a rate of 0.20% per month (article 1727 III CGI), a 10% surcharge for failure to file (article 1728 1. a) CGI), raised to 40% in the event of a deliberate omission (article 1729 a) CGI) or to 80% in the event of fraudulent practices (article 1729 c) CGI). The statute of limitations for reassessment is three years (article L. 169 LPF), extended to ten years where undeclared foreign accounts are involved.

Manage your exit tax with GEOTAX

The exit tax calls for a careful analysis of the taxable base, the holding thresholds, the payment deferral and the security. GEOTAX reviews your assets, assesses your unrealized capital gains and manages the 2074-ET return as well as the setup of the deferral for moves to the UAE.

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