An innovation-friendly tax system

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Disruptive startups are entitled to tax exemptions from the French administration. It enables them to spend more on R&D without burning additional cash.

Many people don’t realise that France provides very attractive tax incentives for entrepreneurs developing new business ventures. Notably, the country is ranked first in Europe, ahead of the United Kingdom and Germany, for its effective corporate tax rate on R&D operations. This acts as a very powerful booster for its innovative startups, be it in deep tech or in the digital space.

An appealing Research Tax Credit

In practice, businesses spending money on scientific and technical research can benefit from a Research Tax Credit (Crédit Impôt Recherche i.e. CIR). Since 2013, this fiscal arrangement has been extended to innovation investments (Crédit Impôt Innovation i.e. CII) made by SMEs that design prototypes for brand new or enhanced products. The tax credit rate for R&D expenditure amounts to 30% of outlay, up to €100m ($113m) per year.

We saved €1.5m in 2018 thanks to Research Tax Credit

Luca Verre, Cofounder and CEO of Prophesee.

This exemption has a significant impact on cash outflows for French startups and scale-ups. The deep tech company Prophesee has created a neuromorphic vision system for machines. It raised $19m in 2018.

 

A special status for innovative startups

Another arrangement you may benefit from when setting up your startup in France is the innovative startup status (jeune entreprise innovante i.e. JEI). It applies if your business is an independent SME of less than eight years that invests at least 15% of its tax-deductible expenses in research. New businesses under this status are entitled to total exemption from personal or corporate income tax the first year they post a profit, and then a 50% exemption the next year. They are also free from local economic contribution and property tax for seven years.

Key figures
  • 93% Percentage of CIR recipients which are SMEs today
  • 5000+ Number of innovative SMEs taking advantage of the CII
  • 120m€ ($136m) Total amount of CII distributed to the SMEs