France Mulls New Tax Breaks To Encourage Hi-Tech Start-Up Investment

by Ulrika Lomas, Tax-News.com, Brussels

31 March 2005

French Finance Minister, Thierry Breton is reported to be studying new proposals that will offer tax incentives to small domestic technology companies in order to encourage more investment in fledgling hi-tech firms, particularly in the biotechnology sector.

According to a report in the Financial Times, the proposals drafted by the research lobby group Conseil Stratégique de l'Innovation (CSI), to be presented to Prime Minister Jean Pierre Raffarin at a meeting later in the month, would give tax breaks on research spending to companies with fewer than 2,000 employees and with revenues of less than EUR150 million.

Lasting for a period of eight years after a company's initial public offering, the package of tax breaks would also give shareholders exemptions on capital gains, wealth and inheritance taxes.

It is thought that the new measures were prompted by the announcement that Paris-based pharmaceutical Company IDM - recognised as one of the country’s most promising biotech ventures - plans to merge with a US company and relocate to San Diego.

This news has been interpreted by observers as symptomatic of the poor investment environment offered to hi-tech start-ups based in France.

The new proposals seek to align the country with the UK, where firms listing on London’s Alternative Investment Market (AIM) enjoy similar tax breaks.

Illustrating this development gap, at present only four biotech firms are listed in France, compared with more than 300 in the US and 50 in the UK, according to the FT.

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