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;
• Massive and permanent reduction in local taxation and production taxes since 2021, with the final abolition of the CVAE scheduled for 2030.

In addition, France has advantageous tax regimes to support research, innovation and the environmental transition, as detailed below. 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 (CIR)
• The “Green Industry Investment” tax credit (C3IV)
• The start-up schemes (young innovative, growing or university companies) and innovative young enterprises with impact (JEII).
• The new businesses scheme

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 €42 500 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 maximum rate, applicable to companies with turnover exceeding €50 million, excluding tax, is set at 0.28% and will be gradually lowered until the CVAE disappears altogether in 2030. It will thus fall to:
  • 0.28% for 2026 and 2027
  • 0.19% for 2028
  • 0.09% for 2029
• 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 has affected 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 is set to 1.531% in 2026 and 2027, then lowered to 1.438% in 2028 and to 1.344% in 2029.  From 2030, this cap will only apply to the CFE, and will amount to 1.25% (compared to 1.438% in 2025, 1.531% in 2024, 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.

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 a scheme that can benefit all industrial, commercial, or agricultural companies taxed on their actual profit (normal or simplified), regardless of 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 (as defined by the Frascati Manual): 

• tax-deductible depreciation of fixed assets used in research (assets created or acquired brand new); 
• staff costs relating to researchers, research technicians and remuneration paid to executives, whether salaried or not, who participate personally and exclusively in research work;
• additional remuneration and fair prices paid to employees who are the authors of inventions resulting from research operations;
• operating expenses: these are set at a flat rate of 75% of depreciation allowances and 40% of research personnel expenses; 
• standardisation-related expenditure;
• collection expenditure incurred by companies in the textile-clothing and leather sector (until 31 December 2027) 
• outsourced research expenses entrusted to approved public or private bodies (retained within the limit of three times the total amount of other research expenses conferring entitlement to the tax credit, and included in the research tax credit calculation base, subject to an overall limit of €2M in the event of a dependency relationship, or €10M otherwise). 

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 component, extended until December 31, 2027, the CII rate is 20% of the eligible expenses retained, up to a limit of €400,000 per year. The rate is 35% for mid-tier companies , for SMEs, 40% of the eligible expenses incurred in operations located on the territory of the Corsican collectivity, and 60% for expenses incurred in operations located in the overseas departments (DOM).

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

Imputation of the CIR

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.

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

Reporting obligations 

Special return no. 2069-A-SD must be filed with the competent SIE (Corporate Tax Department). The amount must be carried over to return no. 2069-RCI-SD.

A simulator for the tax credit for research or innovation expenses is available at the following address: http://www2.impots.gouv.fr/simulateur/cir/simulateur-2025.html

For more details see: Accueil > Professionnel > Simuler une taxe ou un crédit d’impôt > Simulateur du crédit d’impôt pour dépenses de 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. This scheme is extended until 2028, in compliance with the European State aid framework (CISAF).

It benefits industrial investments (productive CAPEX), in addition to the existing support schemes for R&D expenses, for which France is already positioned among the leaders within the OECD with the Research Tax Credit (CIR).

Eligible Companies and Activities

The C3IV is intended for industrial and commercial companies established in France, regardless of their size or legal form, that are subject to corporate tax (IS) or income tax (IR) under the actual regime. Many companies benefiting from tax exemptions (Young Innovative Companies, Urban Free Zones [ZFU], Rural Revitalization Zones [ZRR], etc.) are also eligible.

To benefit from the C3IV, companies established in France must make tangible investments (such as land, buildings, facilities, equipment and machinery) or intangible investments (such as patent rights, licences, know-how or other intellectual property rights) necessary for production in four key sectors:

• Batteries
• Solar panels
• Wind turbines 
• Heat pumps

Expenses of companies enabling the following are eligible for the C3IV:

1. The production of equipment dedicated to the four  sectors mentioned above.
2. The production of essential components and the production or recovery of critical raw materials that meet directly or indirectly the technical requirements of the production of 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.

Tax Credit Calculation: Rates and Ceilings

The C3IV is calculated on the basis of the cost of tangible and intangible investments, subject to compliance with certain conditions. If the assets are allocated to several activities, some of which are excluded from the C3IV, the expenses are only taken into account in proportion to their allocation to eligible activities.

The base rate is 15%, and it is increased by 10 points for medium-sized enterprises and by 20 points for small enterprises. These rates increase if the investment is located in a Regional Aid Zone (ZAFR).

Here is the summary table of the applicable rates in force:

1* Zones defined in paragraph 3(c) of Article 107 of the TFEU 

2* Zones defined in paragraph 3(a) of Article 107 of the TFEU

Ceilings Calculated per Project

The standard tax credit ceiling is €150 million per project. This ceiling is increased respectively to:

• €200 million for investments made in ZAFR 1
• €350 million for investments made in ZAFR 2

These ceilings apply per project and not per company. A project is understood as a set of expenses linked by a common purpose, for carrying out an activity, even if it involves several companies. For an overall project, the rate and ceiling applied are those of the zone where the highest costs are borne.

Prior Approval Request

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.

Particular attention is drawn to the fact that the application for approval must be submitted before the first expenses related to the investment project are incurred.

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. 
> 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) and Young Innovative Companies with Impact (JEII) 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.

In addition, the Budget Act for 2026 also introduces the status of "JEI with impact" (JEII).

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 20% 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 20% of the company's costs) and ownership of its capital, have strong growth potential determined according to economic performance indicators (measured by the evolution of its workforce and its research expenditures).

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).

To qualify as a JEII, the company must meet some criteria regarding its capital ownership. The company must also meet the ESUS criteria regarding the category of a « Socially Useful Solidarity Business» (art. L. 3332-17-1 of the Labour code) or the requirements for commercial companies to be considered part of the social and solidarity economy (SSE) (conditions laid down in Article 1(2) of Law No 2014-856 of 31 July 2014). You will find more information on this subject in the dedicated online documentation:

https://www.tresor.economie.gouv.fr/banque-assurance-finance/finance-sociale-et-solidaire/agrement-esus

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

Tax benefits

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

• corporate income tax: 100% exemption for the 1st profit-making tax year, then 50% exemption for the following profit-making 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. However, the exemption continues to apply to companies set up by 31 December 2023 for as long as they remain eligible under the scheme and for the full duration provided for by that scheme;

  and

• property tax on built-up properties (taxe foncière sur les propriétés bâties - TFPB) 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 corporate income tax exemption (for JEIs created until the 31st of December 2023, as mentioned above) 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 the 31st December 2027;
• rural regeneration zones (ZRR) no later than the 30th June 2024;
• urban regeneration areas (BUD) no later than the 31st December 2026;
• town centre retail revitalisation zones (ZRCV) no later than the 31st December 2026;
• Priority Development Zones (ZDP) no later than the 31st December 2027;
• France ruralités revitalisation (FRR) zones from the 1st July 2024 and no later than 31st December 2029 (the "France ruralités revitalisation" scheme replaces the rural regeneration zones scheme from the 1st 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.

It should be noted that the list of municipalities eligible for the AFR zone scheme is published by decree and regularly updated. The full list of municipalities eligible under the AFR zone scheme is set out in Annex 1 to Decree No. 2022-968 of 30 June 2022, in its consolidated version. The interactive map of AFR zones is regularly updated by the French National Agency for Territorial Cohesion (ANCT).

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.