Tax incentives

The French tax system is innovation- and investment-friendly

For a number of years, France has been on a general path of lowering taxes to support business activity.

Reduction in corporate income tax:

• The rate of corporate income tax (IS) has been reduced to 25% for all companies since 1 January 2022 (compared with 33.3% in 2016). 
• The scope of the reduced rate of corporate income tax (15% up to €38,120 of profit) has been extended to companies with a turnover of €10 million or less.

The French corporate income tax regime is also characterised by tax base measures that are comparable to those of the main countries that are comparable to France: deductibility of most of the company's provisions and depreciation allowances, unlimited carry-forward of losses, broad exemption of dividend payments and capital gains on equity investments, and an attractive group tax regime. 

Massive and permanent reduction in local taxation and production taxes since 2021:

• phasing-out of the business value added contribution (CVAE): the CVAE rate, set at 0.375% in 2023, will be gradually lowered until the CVAE disappears altogether in 2027. The maximum rate, applicable to companies with more than 50 million turnover excluding tax, will thus fall to:
  ◦ 0.28 % for 2024;
  ◦ 0.19 % for 2025;
  ◦ 0.09 % for the year 2026.
• 50 % reduction in property taxes for industrial establishments: property tax on built-up properties paid by businesses (TFPB) and the business property tax (cotisation foncière des entreprises - CFE), totalling €3.25 billion per year from 2021. This reduction will affect 32,000 businesses operating more than 86,000 establishments.
• Optional exemption (subject to being voted by the local authority concerned) from the CFE for 3 years if establishments are created or extended.
• Capping of the territorial economic contribution (CET, which comprises the CVAE and CFE) based on value added reduced to 1.531% in 2024 (compared with 1.625% in 2023 and 3% before 2021). The lowering of this cap will ensure that all or part of the gains for businesses from the reduction in CVAE and property taxes are not neutralised by the cap.

Reductions in direct local taxation (territorial economic contribution, property tax on built-up properties) are also available in certain areas of the country, in particular for the creation or expansion of commercial, artisanal or industrial activities, subject to the relevant local authority decisions.

In addition, France has advantageous tax regimes to support research, innovation and the environmental transition, as detailed below. A large number of tax breaks can also be granted to businesses; these are presented in our dedicated fact sheet, which can be accessed here. You can also consult the information on tax relief and tax credits available to help businesses finance their activities on the website of the French Ministry of the Economy.

•  The Research Tax Credit
•  The “Green Industry Investment” tax credit (C3IV)
•  The start-up schemes (young innovative, growing or university companies)
•  The new businesses scheme

The Research Tax Credit (CIR)

Companies that incur research expenditure can obtain a tax credit that can be offset against their corporate income tax liability.

Beneficiary companies

The Research Tax Credit (CIR) is available to all industrial, commercial and agricultural companies taxed on the basis of their actual profits (normal or simplified), whatever their legal form.

Eligible expenses

For the purposes of the scheme, fundamental research, applied research and experimental development are considered to be scientific or technical research activities.
The research expenses eligible for the tax credit are as follows:

• tax-deductible depreciation of fixed assets used in research; 
• staff costs relating to researchers, research technicians and remuneration paid to executives, whether salaried or not, who participate personally in research work; 
• remuneration and fair prices paid to employees who are the authors of inventions resulting from research operations; 
• staff costs relating to young PhD graduates; 
• other operating expenditure up to a certain limit; 
• costs of registering and maintaining patents and Plant Variety Certificates (PVCs); 
• costs of defending patents and PVCs; 
• depreciation allowances for patents acquired for research purposes and PVCs; 
• standardisation-related expenditure; 
• premiums and contributions or part of the premiums and contributions relating to legal protection insurance contracts providing for the coverage of expenses incurred in the context of litigation relating to a patent or plant variety certificate of which the company is the holder, up to a limit of €60,000; 
• technology monitoring expenses up to a limit of €60,000; 
• collection expenditure incurred by companies in the textile-clothing and leather sector (until 31 December 2022) 

Since 2013 the innovation expenditure incurred by SMEs also benefits from an extension of the CIR, the Innovation Tax Credit (CII). This covers expenditure on the design of prototypes of new products that have not yet been launched on the market or that have superior characteristics, or pilot installations for new products.

Calculation

For its research and development part, the CIR is equal to 30 % of research expenditure up to €100 million (up to 50 % for companies located in the overseas departments) and to 5 % above this threshold. Public subsidies, whether reimbursable or not, received in respect of these research operations must be deducted from the amount of expenditure taken into account.

From 2022 onwards, expenditure giving entitlement to the collaborative research tax credit must be taken into account when assessing the €100 million threshold.  

For its innovation part, since 1 January 2023, the CII is equal to 30 % of eligible expenditure up to a limit of €400,000 per year (the rate is increased to 35 % or 40 % for research and development expenditure incurred on premises located in Corsica, and 60 % for expenditure incurred on premises located in the French overseas departments).  

In some cases, research expenses may be deducted for more than 100 % of their amount.

A simulator for the tax credit for research or innovation expenditure is available here. 

How the CIR is deducted

The CIR is deducted from taxes due by the business. Any remaining non-deducted CIR can be offset against taxes owed for the subsequent three years. The unused portion of the tax credit is refunded after this period. It is immediately refundable for SMEs (as defined in Community regulations), innovative start-ups (JEIs) and firms subject to amicable settlement or safeguard procedure, court-ordered reorganisation or winding up.

Reporting obligations 

The tax credit is deducted from the company's tax liability. The excess tax credit can be used to pay the tax due over the following 3 years; the unused portion of the tax credit is reimbursed after this period. However, SMEs (within the meaning of EU regulations), young innovative companies (JEI) and companies in difficulty (in conciliation, safeguard, receivership or liquidation proceedings) can obtain immediate repayment of the CIR.

For more details see: Accueil > Professionnel > Questions > Puis-je prétendre au crédit impôt recherche ? (in French)

The Green Industry Investment Tax Credit (C3IV) 

To support industrial sectors that contribute to carbon neutrality objectives, a tax credit for companies investing in green industries was introduced in 2024. It benefits industrial investment (productive CAPEX), in addition to existing schemes to support R&D expenditure, for which France is already one of the OECD leaders with the Research Tax Credit (CIR). This public support scheme is particularly popular with manufacturers, and is easy to access. 

To benefit from the C3IV, companies established in France will have to make tangible investments (such as land, buildings, plant, equipment and machinery) or intangible investments (such as patent rights, licences, know-how or other intellectual property rights) necessary for the production of batteries, solar panels, wind turbines and heat pumps.

Expenses eligible to the C3IV are those incurred by businesses that enable:

1. The production of equipment dedicated to the four sectors mentioned above. 
2. The production of essential components designed and used mainly for the production of the equipment defined in point (1): the project sponsor must prove that at least 50% of its turnover will be generated with companies carrying out activities downstream of the production chain for the four sectors mentioned above. 
3. The production or recovery of the critical raw materials required for the production of the equipment and components defined in points (1) and (2): the project sponsor must prove that at least 50% of its turnover will be generated with companies involved in the production of essential components or downstream of the production chain for the four sectors mentioned above.

The equipment, essential components and raw materials used in activities falling within the scope of the scheme are specified in the Order of 11 March 2024 of the Minister for the Economy.

The C3IV is calculated on the basis of the cost of tangible and intangible investments, subject to certain conditions.

The tax credit rate is 20 %. This rate is increased to 25 % or 40 % respectively for investments made in regional aid zones (ZAFR) or in the outermost regions, and increased by 10 points for medium-sized businesses and 20 points for small businesses.

The standard tax credit ceiling is €150m per company. This ceiling is raised to €200m and €350m respectively for investments made in ZAFRs or the outermost regions.

The scheme is subject to prior approval by the DGFIP (SJCF-3A desk in the legal security and tax audit department), after receiving the opinion of the French environment and energy management agency (ADEME) on the eligibility of the project.

To apply for approval or request information, please write to the following dedicated address: c3iv@dgfip.finances.gouv.fr.

The application for approval can be submitted using the form below. In all cases, the application must be submitted before the date on which the building works start.
> Demande d'agrément pour le crédit d’impôt au titre des investissements dans l’industrie verte « C3IV » (PDF)

Young Innovative Company, Young Growth Company or Young University Company (JEI – JEC – JEU) schemes

New companies that invest in research and development and have the status of Young Innovative Company (JEI), Young Growth Company (JEC) or Young University Company (JEU) can benefit from tax and social contributions exemptions.

Beneficiary companies  

To qualify as a JEI, at the end of each financial year, the company must simultaneously meet several conditions relating in particular to its size (headcount, sales), its date of creation, the R&D expenditure incurred (representing at least 15% of the company's costs) and the ownership of its capital.

To qualify as a JEC, the company must, in addition to the conditions relating to its size (workforce, sales), date of creation, R&D expenditure (representing between 5% and 15% of the company's costs) and ownership of its capital, have strong growth potential determined according to economic performance indicators.

To qualify as a JEU, the company must meet a number of conditions relating to its size, date of creation, management and ownership of its capital, and its main activity (development of research work in which the management or shareholders have participated within a higher education establishment).

You can consult all the conditions applicable to qualifying for JEI, JEC or JEU status here: https://entreprendre.service-public.fr/vosdroits/F31188. 

Tax benefits

Companies that have the status of JEI, JEC or JEU can benefit from exemptions in respect of:

• corporate income tax: 100% exemption for the 1st tax year, then 50% exemption for the following tax year for companies created up to 31 December 2023. JEIs, JECs and JEUs set up on or after 1 January 2024 are no longer eligible for exemption from corporation tax; and
• property tax on built-up properties and business property tax (cotisation foncière des entreprises - CFE) for 7 years, subject to local authority approval, for JEIs, JECs and JEUs created up to 31 December 2025.

The income tax exemption can be combined with the research tax credit but cannot be combined with the exemptions and benefits granted to other categories of enterprises (new enterprises and businesses set up in certain areas of the country -- see below).  

For more details, see entreprendre.service-public.fr and the official documentation of the tax administration: BOI-BIC-CHAMP-80-20-20

New businesses

Setting up a business in certain areas gives you the opportunity to benefit from exemptions or allowances on profits, as well as on local taxation, for the first few years of operation.
These exemptions are designed to encourage employment and local economic development.  Companies eligible for these exemptions are those setting up in particular in:

• regional aid areas (ZAFR) no later than 31 December 2027;
• rural regeneration zones (ZRR) no later than 30 June 2024;
• urban regeneration areas (BUD) no later than 31 December 2026;
• town centre retail revitalisation zones (ZRCV) no later than 31 December 2026;
• Priority Development Zones (ZDP) no later than 31 December 2026;
• France ruralités revitalisation (FRR) zones from 1 July 2024 and no later than 31 December 2029 (the "France ruralités revitalisation" scheme replaces the rural regeneration zones scheme from 1 July 2024).

You can find the full list of existing schemes and detailed information on the website of the French Ministry of the Economy.

Beneficiary companies   

In order to be eligible, companies must comply with certain conditions:

• be newly created;
• engage in an industrial, commercial or craft activity;
• be located in the area concerned during the period of application of the scheme;
• in the case of ZAFRs and ZRRs, they must be subject to a tax system based on actual income.

In the ZAFR and ZRR zones, banking, financial and insurance activities (except brokerage), property management or rental activities and sea fishing activities are excluded.

In FRR zones, real estate management or rental activities and sea fishing activities are excluded.

In BUDs and ZDPs, civil, liberal and agricultural activities and property rental are excluded.

If the business is set up as a company, no more than 50% of its capital may be held by other companies in order to benefit from the ZAFR, ZRR, BUD or ZDP schemes. 

The business must be genuinely new. Companies created as part of a restructuring or expansion of a pre-existing business, for example, are therefore excluded. In FRR zones, extensions to existing businesses are permitted.

The head office and all activities and operating resources must be located in these zones.

Calculation of the corporate income tax exemption  

Calculation in a ZAFR, a BUD or a ZDP

In principle, total or partial exemption from corporation tax is provided for a period of five years from the date of creation. The exemption is calculated directly by the company on its tax return, to which it will attach a statement tracking the profits declared.

Calculation in a ZRR or FRR zone

Total exemption from corporate income tax is provided in principle for a period of 5 years, followed by a period of partial exemption for 3 years, provided that the company employs fewer than 11 employees (in certain municipalities in the FRR zone, the staff threshold is set at 250 employees).

Tax benefits are capped in accordance with the European "de minimis" regulation or the General Block Exemption Regulation (GBER).

Ancillary measures

Companies benefiting from these provisions may also be exempted from business property tax (CFE) and/or property tax on built-up properties (TFPB) for the same period, subject to local authorities’ decisions. 

Updated in June 2024