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European Commission Approves French SME Tax Measures

by Ulrika Lomas, Tax-News.com, Brussels

06 November 2015


The European Commission has approved two French tax breaks aimed at facilitating investment in innovative small- and medium-sized enterprises.

Competition Commissioner Margrethe Vestager said: "These two schemes provide better access to funding for high-growth-potential undertakings. They will enable the development of an environment that is conducive to job creation and growth, while limiting distortions of competition."

The impôt de solidarité sur la fortune (ISF) wealth tax-SME scheme provides a 50 percent reduction in wealth tax up to an annual limit of EUR18,000 (USD19,582) for individual taxpayers who subscribe to the capital of innovative SMEs by way of mutual funds for innovation or local investment funds. The Commission approved the scheme in 2008, but re-examined the case after the scheme was modified by the French Government.

The second scheme, for exceptional depreciation of investment by businesses in SMEs, supplements the ISF wealth tax-SME measure. It enables undertakings, whatever their size, to spread the depreciation of investments in SMEs over a period of five years. The investments concerned must consist of the sums paid either for subscription in cash to the capital of innovative SMEs or for units or shares in venture capital funds, professional private equity funds, or venture capital firms.

The Commission examined the compatibility of the schemes with the Guidelines on State aid to promote risk finance investments. It found that the aid proposed was necessary to stimulate investment that would not be provided by the market unprompted. It also concluded that, unlike direct state intervention, the schemes make it possible to tap private savings and rely as much as possible on market mechanisms.

TAGS: tax | investment | small business | business | private equity | European Commission | investment funds | equity investment | small and medium-sized enterprises (SME) | venture capital | tax rates | France | tax breaks | tax reform | European Union (EU) | Europe

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