OD FLASH | Taxation of capital gains from stock options and free shares (RSU): reminder of the primacy of tax residency at the date of disposal of the shares

In a ruling dated 8 July 2025 (No. 23VE00491), the Versailles Administrative Court of Appeal ruled on the tax regime applicable to gains derived from stock options and free shares in the context of international mobility, reiterating that the tax residency of the beneficiary at the time of the disposal of the securities takes preeminence over that at the time of their grant.

The case involved an employee of an oil company who was a tax resident in Kazakhstan from January 2009 to August 2014, where he carried out his professional activities. In 2010, he was granted stock-options entitling him to acquire 10,900 shares of the company, as well as free shares which vested on 14 September 2012. In February 2015, after the taxpayer has re-established his tax residency in France, he exercised his stock-options and sold all the shares, thereby realizing both an option exercise gain and an acquisition gain, which he failed to declare for income tax purposes for the 2015 tax year. The French tax authorities considered that these gains were taxable in France, as the taxpayer’s country of residence at the time of the shares’ disposal, and issued additional tax assessments.

The taxpayer appealed before the Administrative Tribunal of Versailles, which rejected his claim for relief. He subsequently lodged an appeal with the Versailles Administrative Court of Appeal, arguing that these gains were linked to employment performed in Kazakhstan and should therefore be taxable in that State. In support of his claim, he invoked case law and administrative guidelines which, in his view, attributed the gains to the period of employment, justifying taxation at the grant date.[1]

The Court of Appeal rejected all grounds of appeal. It based its decision on Articles 80 bis and 80 quaterdecies of the French General Tax Code (“CGI”). Pursuant to these provisions, the taxation of option exercise gains and gains from the acquisition of free shares arises at the date of exercise of the options and the disposal of the securities. Accordingly, as a tax resident, the taxpayer was liable to French tax on his worldwide income, including gains arising from the disposal of the shares.

Furthermore, the Court held that the gains from the disposal of shares acquired while the taxpayer was employed in Kazakhstan, were taxable in that State according to Article 15 of the France–Kazakhstan tax treaty. However, it also pointed out that Article 23 of this treaty provides for a mechanism to eliminate double taxation, subject to proof of actual payment of tax in Kazakhstan—something the taxpayer failed to demonstrate. Consequently, he was not entitled to claim the treaty-based foreign tax credit.

Lastly, the Court concluded that the French tax administration’s published guidance did not contain any interpretation contrary to the applicable legal or treaty provisions, and therefore the taxpayer can not rely on it.

Through this decision, the Versailles Administrative Court of Appeal reaffirms that the territoriality principle governing the taxation of gains from stock options and free share allocations is to be assessed at the date of disposal of the securities. In an international context, it is essential to carefully examine the provisions of applicable tax treaties, which regularly require proof of effective taxation abroad in order to benefit from double taxation relief mechanisms.

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[1]  CE 3rd Joint Chambers, October 18, 2017, No. 408763; BOI–RSA–ES–20–10–20–60 No. 1, 50, 60, and 200; BOI–RSA–ES–20–20–20 No. 80