SME investment and tax exemption: optimize your tax situation and support innovation

Investing in small and medium-sized enterprises (SMEs) is not only a way to support the local economy, but also to benefit from significant tax advantages. Through tax exemption mechanisms, you can reduce your tax bill while supporting innovative projects within fast-growing companies. Find out more about the different tax opportunities associated with investing in SMEs.

Before investing in SMEs, it's essential to consider the potential risks involved. Although these investments offer significant tax advantages, they also entail risks of capital loss, liquidity and volatility. A thorough analysis of each opportunity is necessary to make informed decisions tailored to your investor profile. We recommend that you consult a financial advisor to assist you in this process.
 

Investing in SMEs, particularly those in a development or growth phase, offers significant tax breaks. Schemes such as FCPI (Fonds Communs de Placement dans l'Innovation) or FIP (Fonds d'Investissement de Proximité) allow investors to benefit from tax reductions on their income tax or ISF (Impôt de Solidarité sur la Fortune). By choosing to invest in these innovative companies, you contribute to their growth while optimizing your tax situation.

Reducing income tax by investing in SMEs

One of the main tax advantages of investing in SMEs is the reduction in income tax. By investing in SMEs, investors can benefit from a significant reduction in their tax base, up to 25% of the amount invested, under certain conditions. In addition to supporting businesses, this type of investment offers a tax reduction valid for 5 years, providing a long-term tax advantage.
 

Subscribing to the capital of a small- or medium-sized enterprise (SME) allows investors to benefit from substantial tax breaks. In addition to the income tax reduction, investors can benefit from advantages on their future earnings. By investing in companies in their start-up or development phase, you support innovative projects and benefit from considerable tax breaks.

It is essential to consider the risks associated with investing in SMEs, particularly in terms of liquidity and potential capital loss, before making any investment decision.

Start-ups are particularly attractive for investors wishing to take advantage of tax breaks. They can benefit from advantageous tax regimes such as the Madelin law or the Young Innovative Company (JEI) status, offering investors tax reductions on the amounts invested. In addition, dedicated investment funds enable investors to diversify their portfolios while reducing their tax bill.

Investors subject to the Impôt de Solidarité sur la Fortune (ISF - wealth tax) can also benefit from significant tax reductions by investing in SMEs. This reduction directly reduces the tax due, depending on the amount invested. Eligible companies must meet strict criteria, ensuring that the investment supports projects with strong growth potential.

Find out more about the ISF investissement PME reduction and eligibility conditions.
 

The 150-0 B-ter capital gains tax regime optimizes the taxation of capital gains realized on the sale of shares. This scheme is particularly advantageous for entrepreneurs and investors, as it allows capital gains from contributions to be tax-exempt, under certain conditions, when they are reinvested in a development project or a holding company.
The main advantage is the deferral of capital gains tax. Rather than having to pay tax immediately, this system allows you to defer taxation and benefit from more favorable tax treatment. What's more, reinvesting shares in a holding company enhances the value of the company's assets, while benefiting from an advantageous tax framework.

To benefit from this system, several conditions must be met: the contribution must be made to a company subject to corporation tax, and the contributed shares must be held for at least 3 years. This mechanism is widely used in business transfer operations, particularly in private equity, as it reduces capital gains tax and facilitates the reorganization of the company while preparing for future growth.

Private equity refers to investment in unlisted companies. This type of investment enables us to finance companies in a development, growth or restructuring phase, by providing capital to support their strategic projects. Private equity can take a variety of forms, including direct investment in SMEs or through specialized private equity funds .

This investment route is particularly attractive for individual investors seeking to diversify their portfolio and benefit from potentially higher returns. Indeed, by acquiring stakes in companies with high growth potential, private equity often offers opportunities for long-term value enhancement. However, such investments entail significant risks, particularly in terms of liquidity, as shares in private equity companies are not easily resold.
 

Investing in small and medium-sized enterprises (SMEs) can considerably reduce your tax bill. By choosing your investments wisely, you can minimize your taxes while supporting dynamic, innovative companies.

The PEA (Plan d'Épargne en Actions)

The PEA is a complementary scheme that allows investors to benefit from tax exemption on capital gains generated by their investment in shares. It is particularly advantageous for investors wishing to diversify their portfolio while reducing their tax bill. By combining the PEA with investments in SMEs, it is possible to reduce taxes on capital gains.

Life insurance

Life insurance is a flexible savings product that allows you to reduce taxes while preparing a long-term investment project. It offers tax exemption on capital gains, under certain conditions, after 8 years of ownership. By combining it with investments in SMEs or funds dedicated to innovation, life insurance becomes an excellent tool for optimizing your tax situation.

Innovation mutual funds

FCPIs are investment vehicles specifically dedicated to innovation and growth sectors such as new technologies, healthcare and the environment. In addition to the tax advantages, investing in an FCPI enables you to support companies with strong growth potential, while benefiting from tax exemption. It's an excellent way to combine profitability with a positive impact on the economy.

Investing in SCPIs

Investing in SCPIs (Sociétés Civiles de Placement Immobilier) enables you to benefit from income tax reductions thanks to schemes such as the Pinel law or the Malraux law. Although primarily focused on real estate, some SCPI funds also invest in SMEs, offering the opportunity to benefit from both the tax advantages of real estate and support for developing businesses.

This article was produced by Eurazeo Global Investor for information purposes only. It should not be construed as a solicitation or offer for financial products, nor as legal, tax, financial or any other kind of advice. Readers are invited to contact their own advisors for any analysis relating to the content of this article. The information presented does not claim to be exhaustive. It should not be relied upon as the sole basis for an investment decision. Please refer to the legal documentation of the funds mentioned before making any final investment decision.

Past performance is not necessarily indicative, nor a guarantee of future results. Information on previous investments is provided solely to illustrate the nature of these investments and the related investment strategy and process. There can be no guarantee that the investments made by the funds will yield comparable results, or that the targeted returns will be achieved. Investing in Private Equity/Private Debt funds involves a risk of capital loss and illiquidity.
 

Investing in SMEs can offer considerable tax advantages, but it's crucial to understand that this type of investment also entails risks. Before making an investment decision, it's essential to assess these risks carefully to ensure that the investment fits your profile.

Risk of capital loss

SMEs, particularly those in the development phase, present a higher risk of capital loss. These companies may be more vulnerable to economic fluctuations, competition and internal management, which can lead to a decline in the value of the investment. It is important to consider these risks before committing to this type of investment.

Liquidity and volatility risks

The shares of SMEs are often less liquid than those of large listed companies. This means that it can be more difficult to sell shares quickly without affecting their sale price. In addition, the volatility of SME-related markets can lead to significant short-term price variations, making the investment less stable.

Risks associated with business management

The management of SMEs is a key factor in their success. However, the management of these companies can sometimes lack experience or sufficient resources, which can affect the company's profitability and long-term viability. Poor financial or strategic management can lead to significant losses.