French fund giant Carmignac Gestion is at the centre of a probe over possible tax fraud.

The investigation, which was first reported in French paper Le Monde and has since been widely covered, is being conducted by the French public prosecutor.

Commenting on the reports, Miles Dean said the outcome will depend on how exactly employees gained the shares.

“Companies often implement share ownership plans for their employees as a way of incentivising the work force, as opposed to creating a tax benefit for them. Many such schemes are approved for tax purposes and therefore come with a blessing from the tax authorities,” Miles said.

“It appears that Carmignac Gestion’s arrangement was unapproved but, notwithstanding the potential tax benefits, much will depend on how the employees obtained their shares – namely, whether this arrangement was a top up to their salary or a replacement.”

Miles also pointed out that in order to receive dividends, the firm’s employees must have been shareholders in the Luxembourg subsidiary.

“It would be impossible for the individuals to receive dividends in the absence of this vital element,” he said.

“If employees were given the shares, there is likely to be an income tax charge on the value of shares they received. If they paid for their shares at a fair market value then they have a right to receive a dividend.”

Read Miles’ comments in Citywire