JEI tax exemption: Let France offer you a bouquet of flowers

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Are you a young start-up, developer, or small business? Looking for a place where you can launch your business and begin creating the future? Perhaps you’ve already started your firm and you’re looking for a place to set up your R&D activities?

Look no further than France. Let us welcome you with the fragrant bouquet of flowers that is a combination of tax cuts, social contribution exemptions (JEI status) and one of Europe’s most attractive R&D tax credits.

France: a country that fosters the growth of young innovative businesses

In its ten first years of existence, the number of businesses who’ve been granted a JEI (that is to say “Jeune Entreprise Innovante” or “Young Innovative Company”) status has grown from 1,300 in 2004 to 3,289 in 2014[1]. In 2014 alone, exemptions in tax and social contributions amounted to €139m.

What are the exemptions provided by the JEI status?

The exemptions are twofold:

1. Tax exemptions for the innovative company:
   1. A 100% exemption of corporate tax[2] the 1^st year following JEI status, and a 50% exemption for the 2^ndyear (following JEI status).
   2. No territorial CFE or CVAE taxes within 7 years of incorporating the company
   3. Certain capital gains tax exemptions if the conditions are met
2. Social exemptions for the employer recruiting certain employees and executives:
   1. Unemployment contribution
   2. Social Security contribution
   3. Family allowance contribution

However, employees still bear the cost of the social contributions.

How can Maupard help you?

First of all, we have noticed that our clients usually have no prior base in France. We can guide you through the preliminary stage of setting up your business: help you choose the right legal frame, open a bank account, have you registered with the Tax Administration and for Social Security, etc.…

We also make sure you meet the minimal requirements to be granted the JEI status.

Indeed, a company must meet 5 criteria to be deemed a JEI:

1. It must be less than 8 years old
2. It must be an SME
3. It must be independent, meaning in the case of an incorporated company that at least 50% of equity must be held by:
   1. Private individuals
   2. Recognised scientific public interest charities or foundations
   3. Research and higher education establishments
   4. A company who already has JEI status
   5. Venture-capital companies and other investment companies
4. It must be truly new, i.e. it can’t be the result of:
   1. An M&A operation
   2. A restructuring plan
   3. An activity extension
   4. An asset contribution of a business unit
5. It’s R&D expenditure must represent at least 15% of its total tax-deductible expenses, excluding those engaged for projects of other JEI businesses with R&D projects

When we have this information, we request a ruling from the tax administration to secure your status as a JEI to protect you in the case of a tax audit. Then, we send a formal declaration of JEI status to the French Tax Administration.

We apply the same method with the R&D Tax Credit: we compile all eligible costs and then request a ruling from the Tax administration. This ruling will allow you to claim the tax credit and even ask for an immediate refund, thanks to your JEI status.

A last word from Maupard

Did you know that even unincorporated companies could benefit from both these measures?

Want to know more about our services? Click here to learn all about the CIR R&D Tax Credit and here and here to see our other services.

[1] 1. Source : the French Ministry of Higher Education, Research and Innovation, https://publication.enseignementsup-recherche.gouv.fr/eesr/10/EESR10_R_40-les_jeunes_entreprises_innovantes.php

[2] 2. or income tax if you’re a private individual operating business on your own