Investment: Up to 50% tax cut thanks to JEI in 2024 in France

Innovative companies, drivers of the economy

In the current economic landscape, characterized by fierce global competition and rapid technological advancements, innovation is more central than ever to companies' development strategies. Therefore, since 2004 and the creation of the « Innovative Young Company » (IYC) status, the State has been encouraging research and development (R&D) and the rise of startups.

This system, along with the development of private equity (including FCPI) and crowdfunding, has allowed these non-listed SMEs to raise significant funds in recent years. But the slowdown in collections, as sudden as it is recent, is undermining many projects even as the technology sector is more booming than ever. It is in this context that Parliament voted in late 2023 for new tax incentives in favor of IYCs.

The interest in these SMEs and startups is no coincidence. According to the report by deputy Paul Midy, published in June 2023, they play a crucial role in terms of direct and indirect jobs, covering non-qualified, semi-qualified, and highly qualified positions, while offering salaries above the average. Therefore, supporting these entities is of paramount importance.

Annonce

Up to 50% tax reduction for individuals

The Young Innovative Enterprise (YIE) status aims to encourage the attractiveness of small and medium-sized innovative enterprises (SMEs) that dedicate at least 15% of their expenses to research and development (R&D). These must be less than 8 years old and have fewer than 250 employees.

To increase their capacity to raise funds, the budget law for 2024 has created 2 new statuses, making about 2,000 new companies eligible:
- the status of Young Innovative and Growth Company (YIGC), open to SMEs which dedicate between 5% and 15% of their expenses to R&D;
- that of Young Enterprise of Innovation and Disruption (YEID), applicable to deep tech (disruptive technologies) created less than 12 years ago and dedicating at least 30% of their annual expenses to R&D.

Taxpayers who choose to invest in a YIE between 2024 and 2028 will be eligible for a tax reduction of up to 50% of the amount invested. The rate of tax relief mainly depends on the status of the supported company:
- For YIGCs, the tax reduction is 30%, with a donation limit of 150,000 euros per tax household or 75,000 euros per individual;
- For YEIDs, it reaches 50% with a limit of an investment of 100,000 euros per tax household or 50,000 euros per individual.

However, the maximum tax benefit obtained over the period from January 1, 2024, to December 31, 2028, will be capped at 10,000 € per year per tax household (capping of tax loopholes), or 50,000 € over 5 years.

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Invest in innovative young companies

For a savvy individual who wishes to support an innovative company and benefit from a tax reduction, the most complex issue will probably be finding the perfect match: a promising company that has declared the appropriate status.

Investors can turn to general crowdfunding platforms to find a selection of eligible projects. Anaxago reports that it currently has two YICs in the health sector and one YIC in the technology sector. Tudigo and Sowifund may also offer investment solutions. In all cases, individuals are strongly encouraged to diversify their investments to spread their risk of loss.

Investing in FCPI (Joint Placement Funds in innovation) has the merit of delegating the choice of supported companies to specialists and offering diversification among several structures. However, it is not eligible for the tax reduction related to YICs. Individuals should still be able to benefit from the 25% reduction bonus for investing in SMEs as of the date of publication of the annual decree (subscriptions made before this date will only be entitled to a reduction of 18%). In 2023, this was published in March.