As part of the 2024 French budget passed by the French government last week. without voting, France plans to create a new tax break for angel investments in technology startups. In many ways, France is drawing inspiration from the UK’s tech ecosystem for this change.
If you are a UK angel investor, you may already be familiar with the acronyms SEIS and EIS, which stand for Seed Enterprise Investment Scheme and Enterprise Investment Scheme. These two tax breaks have encouraged angel investments in small private companies, typically technology startups, since 1994.
In the UK, investments in early-stage startups have an annual investment cap of £200,000 and are eligible for a 50% income tax deduction. You may be wondering, what exactly is an early-stage startup? Criteria change over time, but currently, SEIS-compatible companies are those that are less than three years old, have fewer than 25 employees, and have total assets. UK businesses under £350,000.
“I have benefited from SEIS both as a founder and as an investor. SEIS funding reduces the risk of angel investing and allows startups to close rounds faster,” said Reedsy. co-founder and CEO Emmanuel Nataf told me. “The fact that all taxpayers, not just the wealthiest, can benefit from tax cuts makes them a real enabler for the UK’s tech ecosystem.”
When it comes to corporate investment schemes, as the name suggests, they cover a wider range of companies. However, in that case, individual investors will only receive a 30% income tax reduction. EIS-compatible companies should be less than seven years old, have fewer than 250 employees and have total assets of less than £15m.
Interestingly, deep tech companies still qualify if they have been in business for less than 10 years, so they have a little more leeway. An individual can invest up to £1 million a year to receive a tax deduction (for deep tech investments he can invest £2 million).
And it’s working incredibly well.According to Report from Paul MidiThe MP, who represents Emmanuel Macron’s party on the subject, said a total of £175 million and £1.6 billion have been invested in private companies through SEIS and EIS respectively (as of today). 213 million and $1.95 billion respectively) (exchange rates).
“Angel investors who use this system also provide significant support to founders, which may be difficult to obtain from institutional investors,” Nataf added.
Importing SEIS and EIS schemes
Now that we understand how this works, France is essentially copying these systems with a different standard. From 2024, the JEI label (Jeunesse Entreprize Innovantes) is eligible for a 30% income tax reduction.
Starting in 2025, two new categories will be created: JEIC and JEIR. C is Croissant and R’s rupture. These acronyms are a bit technical, but the bottom line is that an investor in a deep tech startup can receive a 50% tax break on investments of up to 100,000 euros per year. Investors in other start-ups can enjoy a 30% tax break on investments of up to €150,000 per year.
“This scheme for so-called ‘young enterprises’ aims to help thousands of young innovative businesses gain jobs, raise capital, improve cash flow and access public contracts. .” Said In a video on X (formerly Twitter). “This should enable our startups to raise an additional EUR 500 million annually, especially in their early stages.”
It will take some time for the French tech ecosystem to feel the impact of this regulatory change. But this is a welcome change, as France, like many tech ecosystems around the world, is experiencing a slowdown in traditional VC investment.
Source: techcrunch.com
