The 2025 finance bill
The 2025 finance bill, tabled on October 10, 2024, raises several questions within the startup ecosystem, particularly about the tax incentives that until now favor young innovative companies (JEIs) and their investors. Among the most worrying measures, the abolition of tax and social benefits for YICs is at the top. Although some incentives for individual investors are maintained, several points are likely to be debated in the National Assembly and the Senate.
Abolition of tax and social benefits for YICs
Innovative start-ups have so far benefited from reductions in social security contributions and significant tax incentives for their research and innovation projects. The PLF2025 plans to remove these benefits, which risks slowing down the hiring and attractiveness of early-stage startups. The removal of these reductions could directly impact their ability to attract highly qualified talent, while increasing their operating costs.
Recent figures for the Research Tax Credit (CIR) and the Innovation Tax Credit (CII) underline the importance of these schemes for the startup ecosystem. In 2024, the CIR represents around €6.9 billion annually, affecting more than 16,300 companies, mainly SMEs. The CII, on the other hand, benefits more than 10,000 companies, for a total amount of €360 million. The removal of these incentives could thus have a considerable impact on investment in innovative startups in France, increasing risks and reducing their margins. (source)
Continuation of the tax incentive for retail investors
The tax incentive for individual investors in YICs, often cited as essential to encourage innovation in France, is for the moment maintained in the bill. However, this does not mean that it will be spared from parliamentary debates. The upcoming discussions in the National Assembly and the Senate could lead to modifications or adjustments to this measure.
If this incentive were to be reduced or removed, it could discourage business angels and other individual investors from supporting young innovative companies, which would risk weakening the dynamism of startup financing in France. The stability of this incentive will be crucial to maintain a flow of private investment in the startup ecosystem.
Abolition of the ITC (Innovation Tax Credit)
Another controversial measure is the abolition of the Innovation Tax Credit (CII). This scheme allowed companies to benefit from tax relief on innovation-related expenses. Its abolition could directly penalise startups that relied on this support to finance their R&D projects.
The abolition of the CII could limit the ability of start-ups to finance their innovation projects, thus reducing their growth potential. Less support for innovation also means that startups could be less competitive internationally, reducing opportunities for expansion and the creation of skilled jobs.
The CIR under the microscope
The Research Tax Credit (CIR), another essential lever for startups and technology companies, remains unchanged for the moment in the current text of the PLF2025. However, as Paul Midy pointed out, this point will probably be discussed in Parliament. The CIR is a major scheme that allows companies to benefit from a tax credit on research and development expenses.
Maintaining the CIR is essential to ensure that startups remain attractive to venture capitalists and business angels, who see this scheme as a way to limit financial risks. The possibility of reducing R&D costs thanks to the CIR contributes to the attractiveness of French startups compared to other European ecosystems.
The big benefits of PLF2025 for startups
The PLF2025 still has several advantages to take into account. Here are the 5 main ones:
Continuation of the tax system for investors in SMEs and startups: Despite the abolition of tax advantages for JEIs, the Madelin scheme (which allows investors to benefit from an income tax reduction equal to 18% of the amount invested in an SME) is maintained. This remains a positive point for encouraging private investment in young innovative companies.
Tax incentives for investment in unlisted companies: The PLF2025 continues to offer tax benefits to those who invest in unlisted companies through the Dutreil Pact. This scheme reduces inheritance tax on business transfers, encouraging sustainable investments in unlisted companies, including startups.
Support for the ecological and digital transition: The 2025 finance bill includes several measures aimed at financing the ecological and digital transition, which can indirectly benefit Greentech or Tech for Good startups. Additional funds will be allocated to innovative projects in these sectors, opening up funding opportunities for startups operating in these fields.
State-guaranteed loan for SMEs and startups: The PLF2025 includes a maintenance and extension of state-guaranteed loans (PGE) to support distressed companies, including startups, in response to the current economic crises. This offers a form of security to young companies looking for liquidity to grow.
Acceleration of public investment in innovation: The government plans to increase public funding to support incubators, accelerators, and innovative research projects through schemes such as the France 2030 Plan. This means that growth-stage startups in strategic sectors (artificial intelligence, biotech, sustainable technologies) could benefit from additional support.
The 2025 finance bill raises important questions about the future of French startups and the investor ecosystem. The removal of tax and social benefits for YICs as well as the removal of the CII could represent brakes on innovation in France, while the tax incentive for individual investors in startups remains a talking point to watch. The outcome of the parliamentary debates will play a key role in how investors can continue to support the new generation of French entrepreneurs. It is therefore essential for investors to follow these discussions carefully and consider potential adjustments in their strategies based on upcoming legislative decisions, particularly with regard to YIG tax benefits and tax credits.
