A decree published in the Journal Officiel on May 8, 2021 makes official the extension of the IR-PME income tax reduction scheme until December 31, 2021. Who is eligible? And under what conditions? All the answers.
Definition of the Madelin IR-PME scheme
This scheme providesa 25% income tax reduction by investing in a small or medium-sized enterprise (SME). To encourage individuals to invest in this type of structure, for which the need for equity capital has increased with the Covid-19 crisis, the 2021 Finance Act plans to extend it by one year, with an increased rate for payments made up to December 31, 2021.
What are the eligibility conditions?
To benefit from the tax reduction offered under the Madelin scheme, you must :
- Be an individual domiciled in France for tax purposes, or a legal entity whose corporate purpose is to invest in companies eligible for the Madelin scheme;
- Subscribe in cash to the initial capital or to an increase in the share capital of an SME in its seed, start-up or expansion phase;
- Undertake to hold the shares received for at least 5 years.
What are the company's requirements?
To be eligible for the tax reduction, the company must meet certain conditions, including the following:
- Be headquartered in France or a European Economic Area (EEA) country;
- Must have been created less than 7 years ago and be in the seed, start-up or expansion phase;
- Not be a company in difficulty, nor be involved in the shipbuilding, coal or steel industries;
- Be subject to corporate income tax (IS);
- Carrying on a commercial, craft or agricultural activity;
- Not listed on a stock exchange or regulated market;
- Employ at least 2 employees at the closing date of the financial year following the subscription giving entitlement to the tax reduction.
How much is the tax reduction?
The tax reduction corresponds to 18% of the amount paid up to August 9, 2020, and 25% of the amount paid from August 10, 2020 to December 31, 2020. Since the publication of decree no. 2021-559 on May 8, this higher rate for payments made to subscribe to the capital of an SME has been maintained until December 31, 2021.
Lastly, payments are limited to 50,000 euros for single, widowed or divorced people, and 100,000 euros for married or civil-union partners. Once this ceiling is exceeded, the benefit of the tax reduction is not lost, but only carried forward to the following 4 years, subject to the same limits.