France is looking to boost angel investment in tech startups by implementing a new tax relief system, taking inspiration from the successful schemes in the UK. The French government recently passed the budget for 2024, which includes the creation of tax relief options for angel investors.
Key Takeaway
France is looking to replicate the success of the UK’s tax relief schemes, SEIS and EIS, to boost angel investments in its own tech ecosystem.
Drawing from the British Model
The UK has long been known for its supportive tech ecosystem, with tax relief schemes such as the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) playing a crucial role in fostering angel investments in small private companies, particularly in the tech sector, since 1994.
Under these schemes, UK angel investors receive a 50% tax break on their income tax for investments in early-stage startups, capped at £200,000 per year. To qualify as an SEIS-compatible company, a business must be less than three years old, have fewer than 25 employees, and hold less than £350,000 in gross assets.
Emmanuel Nataf, the co-founder and CEO of Reedsy, highlighted the positive impact of the SEIS scheme, stating that it de-risks angel investing and allows startups to raise funding faster. He also noted that the accessibility of the tax breaks to all taxpayers, not just the wealthy, has contributed to the growth of the UK’s tech ecosystem.
The EIS scheme, on the other hand, offers a 30% tax break for individual investors, with eligibility criteria including companies that are less than seven years old, have fewer than 250 employees, and maintain gross assets below £15 million. However, deep tech companies have more flexibility, as they can be up to 10 years old and investors can contribute up to £1 million per year and receive the tax credit.
France Adopts Similar Tax Relief System
In an effort to replicate the success of the SEIS and EIS schemes, France plans to introduce its own tax relief system for angel investors. Starting in 2024, individuals investing in companies with the JEI (jeunes entreprises innovantes) label will be eligible for a 30% income tax break.
From 2025, two new categories will be introduced: JEIC (jeunes entreprises innovantes de croissance) and JEIR (jeunes entreprises innovantes de rupture). Deep tech startups in the JEIC category will receive a 50% tax break for investments up to €100,000 per year, while other startups in the JEIR category will receive a 30% tax break for investments up to €150,000 per year.
The aim of these schemes is to foster growth in young innovative companies, enabling them to hire, raise capital, improve cash flow, and gain access to public contracts. It is estimated that the new tax relief system could result in an additional half a billion euros in fundraising for French startups each year, particularly in the early stages.
While it may take time for the effects of these regulatory changes to be felt in the French tech ecosystem, this move is seen as a positive step in overcoming the current slowdown in traditional VC investments.
In Conclusion
France’s adoption of the UK’s tax relief schemes for angel investments is a strategic move to support its growing tech ecosystem. By implementing similar tax breaks, France aims to create a more favorable environment for angel investors, attract more funding for startups, and drive innovation in its tech sector. This initiative has the potential to significantly contribute to the growth and development of the French startup scene in the coming years.
