In the event of direct subscription to the capital of an unlisted “European” SME or through a specialized investment fund such as local investment funds (FIP) and mutual funds in the innovation (FICP), individuals can claim, under certain conditions, an income tax reduction, commonly called Madelin or IR-PME reduction.
This tax reduction is proportional to the payment made by the individual. In the event of direct subscription, the payments made are retained within the annual limit of 50,000 euros (single person) or 100,000 euros (married or civil partnership). The fraction of payments exceeding this annual limit gives entitlement to the tax reduction under the same conditions for the following four years.
In the event of subscription through FCPI and FIP, payments are retained within the limit of 12,000 euros (single person) and 24,000 euros (couple) for each fund category, without possible postponement in the event of exceeding the annual payment limit.
Initially set at 18%, the rate of the tax reduction should have increased to 25% from the year 2018, subject to an agreement by the European Commission. As the latter gave its response late, the increased rate of 25% could ultimately only be applied to payments made between August 10, 2020 and December 31, 2020.
The Finance Law for 2021 adopted at the end of 2020 renewed this rate increase for one year, i.e. until the end of this year. But the entry into force of the boosted rate was again subject to the approval of the European Commission. However, the agreement was not finally received until spring 2021. Consequence: this year, only payments made between May 9 and December 31, 2021 will benefit from the increased rate of 25%.
Yoyo effects
To avoid these yoyo effects, an amendment to the Amending Finance Law for 2021, which was published in Jofficial journal (JO) on July 20, already plans to renew this device in 2022. For the author of the amendment, Laurent Saint-Martin (LRM), general rapporteur of the budget, the fact of providing for the extension of the device from the Amending finance law – without waiting for the finance law for 2022 – should provide “sufficient time” for the European Commission to allow it to render its decision before the end of the year and avoid a new cut in the system at the start of the year. next year.
Clearly, if everything goes as planned, the increased rate of 25% should apply continuously to payments made between May 9, 2021 and December 31, 2022. The goal? Support the recovery by directing the savings accumulated during the crisis towards equity investments in SMEs and mid-cap companies, in particular the youngest of them.