France France: Diverse Subsidies to the Investors

Author Stéphane Itasse

For companies, which invest in France a series of subsidies are made available by the government in Paris and also the regions. The companies in Germany can only dream of some of these means.

German companies, such as Lapp Kabel, are often active in France. These can profit from the sponorships under specific conditions.
German companies, such as Lapp Kabel, are often active in France. These can profit from the sponorships under specific conditions.
(Photo: Lapp Kabel)

Since years, VDMA is demanding the option that the companies in Germany can set off their research spending against tax liability. This is the reality on the other side of the Rhine: Companies can claim 30 % of their yearly research spending up to 100 million Euro, which are incurred in France, through tax credit (crédit d’impôt recherche), as reported by the investment promotion agency Business France. For over 100 million Euros, it is nevertheless 5 %. The basic research, applied research, prototype usage and pilot installations are promoted.

French development bank can pre-finance tax credit

Personnel costs (gross salaries plus social security contributions) of the researcher and technician, which are raised by 50 % for the overhead costs, depreciation on properties and assets, which are used for the research and development, costs for external research in universities, research institutes or in commissioned companies as well as patent costs belong to deductible expenses.

If the company makes loss and thus does not pay any corporate tax, then the corresponding amount for up to three years is reimbursed in the subsequent year. Moreover, the development bank BPI France can pre-finance small and middle-sized companies for tax credit, provided these have received it at least once. With this pre-financing, Paris wants to strengthen the liquidity of small and middle-sized companies.

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The country promotes research projects through Government departments or public institutions

In addition, the country promotes different research projects, which are organized either through Government departments (primarily for economy, industry, research and environment) or through public institutions such as BPI France or National Research Agency (Agence Nationale pour la Recherche – ANR). Public authorities contribute to additional financial resources.

However, Paris not only supports the companies in research and development, but also in other investments and creation of workplaces. According to Business France, capital expenditures in properties, buildings and equipment as well as the wage costs and incidental wage costs estimated for the upcoming two years, which are linked to the investment, can be promoted. The forms may be very diverse, not least, since the subsidy limits are based on a plan agreed upon with EU-committee. The investment promotion agency helps the companies to find suitable support for their investment project. The big companies must maintain aided projects for five years; the term is three years for small and medium-sized companies.

The European Union specifies special regulations for major projects with an amount of more than 50 million Euros, if these are implemented by one or more companies within a period of three years and display an indivisible economic combination. In this case, the country informs the European committee regarding the sponsorships, wherein the upper limits are regionally different.

In specific regions with disadvantages, the local public authorities – from the local authorities via the departments through to the regions – furthermore decide that a company shall be completely or partially exempted from local taxes, if it settles there, expands or takes over a different company in need of rehabilitation. The exemption of such taxes is limited to five years.

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The development bank explicitly welcomes the dedication of foreign companies

Preferential financing for investments are offered through the development bank BPI France, which France has established according to the model of German KfW. "The dedication of foreign companies is a positive, essential factor to create workplaces and to stimulate national economy", explained Nicolas Dufourcq, Director General of BPI France.

The subsidiaries of foreign companies could therefore profit from the financing, according to the same criteria as the French companies. The employees in 42 regional branches of the development bank as provided as contact persons. "The financing models of BPI France contribute towards the attractiveness of investment location, where we want to welcome more foreign partners every day", said BPI-France-General Director Dufourcq.

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