Merger premium: definition, taxation and vigilance

Updated March 29, 2026 - The merger premium appears in merger-absorption operations when the value of the contributions exceeds the nominal value of the securities issued in return. In practice, it should not be confused with the merger bonus, nor with a simple réservé freely distributable without prior analysis.

The merger premium is first and foremost an accounting and corporate concept. It records the difference between the contribution value received and the nominal value of the securities delivered by the absorbing company.

To complete, see also Taxation and business taxes, Business tax audit and Tax verification.

In practice, the premium is best read as part of the whole merger architecture. The contribution value, the share exchange ratio and the capital increase should all point to the same economic story. If they do not, the file is harder to defend later with shareholders, auditors or the tax administration.

That is why a short, coherent explanation often matters more than a long but unclear file.

It also makes later review easier, because the same reasoning can be followed without rebuilding the file from scratch.

Merger bonus#

It is placed on the liability side as a component of equity according to the accounting scheme used for the operation.

Merger Bonus#

The BOFiP points out that the bonus follows a différent logic, particularly in its tax analysis at the partner level.

The tax régime depends on:

• the qualification of the operation;
• whether or not to resort to the special merger régime;
• the nature of the sums subsequently distributed;
• and complete documentation of the operation.

• treat the merger premium as an ordinary réservé without tax review;
• poorly distinguish bonus, mali and bonus;
• forget the effect of subsequent distributions;
• secure the legal act without finalizing the tax analysis.

Hayot Expertise Advice: on a merger, good accounting entries are not enough. It is also necessary to anticipate the future tax life of the premium recorded as a liability.

We support merger projects on the accounting, tax and documentary aspects in order to limit risks during operations and subsequent distributions.

Quick link: Structuring your merger with legal and tax support

Merger premium often draws attention because it looks like a simple accounting difference between contributed value and nominal capital. In practice, it needs to be read within the economics of the whole transaction: valuation method, balance between the parties, treatment of reserves, readability of the accounts and the later effects on governance or distributions.

Useful checks before reaching a conclusion#

Before finalising the analysis, it helps to review:

• the valuation logic behind the contribution;
• the capital structure before and after the deal;
• the existence of other accounting or legal adjustments;
• how the transaction will be read by shareholders and partners;
• the effect on future accounts and comparability.

Merger premium is only meaningful when it is understood in context. The right question is not only how large it is, but what it says about the underlying structure and fairness of the transaction.

A merger file is easier to defend when the accounting entry, the legal project and the tax treatment all tell the same story. That means the file should show why the premium exists, how the contribution value was built and why the final balance is coherent with the share exchange ratio.

In practice, keep these éléments together#

• the merger project and its annexes;
• the valuation basis used for the contribution;
• the accounting treatment of the premium;
• the legal approvals and resolutions;
• the notes that explain any later distribution or réservé movement.

If the operation is complex, the premium should be reviewed again before the final signature. That is especially true when the contributions are heterogeneous, when there are several classes of securities or when a future distribution is already being discussed. A few extra hours of review usually save far more time than they cost.

Each shareholder should be able to understand where the premium comes from, how it relates to the exchange ratio and what it means for equity after the merger. If the file cannot explain that in plain language, the premium is not yet fully secured.

Final checks#

• the valuation method is clearly explained;
• the merger project and the journal entry match;
• any future distribution is assessed in advance;
• the file can be read by a third party without guesswork;
• the documented choice can be defended if the file is reviewed later.

In 2026, the merger premium remains a technical subject. Too rapid qualification can weaken the entire operation or future distribution.

Under French tax law, mergers can qualify for either:

Standard regime: the absorbed company's assets are valued at fair value, generating taxation of unrealised gains at the entity level. The merger premium may be larger but the tax cost is immediate.

Special merger regime (régime de faveur, article 210 A CGI): the absorbed company's assets are maintained at their tax book value (valeur fiscale). No immediate tax on unrealised gains — they are rolled over to the absorbing entity. The merger premium computed under this regime will differ from fair-value accounting. This is the regime used in most commercially driven mergers.

Key implication: the merger premium recorded under the special regime reflects the difference between book (tax) value of the contributions and the nominal value of the shares issued — not fair value. This creates a technical divergence between the accounting premium (ANC rules) and the tax analysis, which must be reconciled carefully in the documentation.

Assume Company A absorbs Company B:

• Tax book value of Company B's net assets: €2,000,000
• Nominal value of new Company A shares issued: €800,000
• Merger premium = €2,000,000 − €800,000 = €1,200,000

This €1,200,000 appears on Company A's balance sheet as prime de fusion under equity. Its future treatment matters:

• It cannot be freely distributed without prior analysis of tax consequences
• If it represents pre-existing reserves of Company B (distributed via the merger), its distribution may generate dividend treatment
• Any subsequent capital reduction using the merger premium requires a tax review

For US and international professionals: the French prime de fusion is conceptually similar to the excess consideration over book value in a US merger, but the treatment differs:

• Under US GAAP, the premium is typically recorded as goodwill or additional paid-in capital
• Under French GAAP (PCG), it has a specific equity line (prime de fusion) with regulatory constraints on its distribution
• Any cross-border merger involving a French entity will trigger additional analysis under the EU Merger Directive and potentially create reporting obligations in the parent's jurisdiction

(Official sources: BOFiP — tax regime for mergers, BOI-IS-FUS, analysis of the merger bonus)

This English section is written for international readers who need to apply the French guidance to a real management decision. The key point for French merger premium is not to memorise every technical rule, but to connect the rule to documents, deadlines, cash impact and governance. For groups preparing mergers, restructurings or post-acquisition simplification, the right approach is to identify the decision to be made, collect reliable evidence, and only then choose the accounting, tax, payroll or legal treatment.

The practical decision is how the premium should be calculated, presented and reconciled with legal and tax documentation. That decision should be documented before the year-end close, financing discussion, payroll run, transaction signing or tax filing concerned by the topic. When the matter is material, the file should include who decided, which assumptions were used, and which professional advice was obtained.

Evidence to keep#

• valuation report;
• exchange ratio;
• merger agreement;
• opening balance sheet;
• tax regime memo;

The merger premium is not only an accounting label; it must match the valuation, exchange ratio and legal merger file. A clean file also helps the company answer questions from banks, investors, auditors, tax authorities, employees or buyers. It is usually cheaper to prepare that evidence during the process than to reconstruct it after a dispute, audit or urgent financing request.