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Tax incentives for young innovative businesses


On 29 August 2014 French tax authorities issued new commentaries on young innovative businesses incentives. Taxand France summarises the main aspects of this new regulation.

The new regime provides young, small or medium business carrying out research activities with total and partial income tax and social security contributions exemptions for a limited period. These incentives add to other favorable tax regimes including R&D tax credit and specific warrant tax treatment for certain categories of entrepreneurs.

Income tax exemption
Qualifying businesses are fully exempt from income tax during their first profitable fiscal year since their option for the regime, and 50% exempt on the second profitable fiscal year. These 2 fiscal years do not need to be consecutive. The exemption applies to taxable profits with the exception of income derived from dividends, profits derived from a transparent entity, subsidies received or debt write-offs benefiting to the business, and financial income exceeding financial expenses of a given fiscal year.

Social security contribution exemption
Qualifying businesses also benefit from a social security contributions exemption on remuneration paid to researchers, technicians, R&D project managers, in-house IP counsels and pre-use test personnel. 

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Your Taxand contact for further queries is:
Frédéric Teper
T. +33 1 70 39 47 81

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Taxand's Take

Young businesses should make sure they are aware of the new incentives and the qualifying criteria to make the most of this latest development. 

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