France Business Information / Grants & Business Incentives
The following information has been provided by Invest in France.
Obtaining financial support in France depends on the type of investment project (productive investment, research and development, innovation, training, etc.), the location of the investment project (priority development zones or non-priority zones) and the type of company (large company, SME). The French authorities support investment projects that entail:
- investment and job creation by large companies in economically disadvantaged regions and regions undergoing industrial redevelopment; these regions are indicated on a map approved by the European Commission (Regional Aid Zones map)
- business R&D projects
- professional training programs for employees
- job creation for defined populations
- investment and job creation by SMEs in all parts of the country
- protection of the environment.
With the exception of support for investment and job creation by large companies which is specifically zoned, the French authorities can provide support to companies all over France for research and development and innovative projects, employee training programs and hiring “disadvantaged” employees, as well as projects to protect the environment.
Support may be granted by the national government or regional and local authorities (régions, departments and communes in France), particularly in the form of subsidies, tax exemptions and tax credits. Support can be received from several different sources, up to but not exceeding the maximum allowable limit for providing effective support for business start-ups, job creation, investment and business development.
EU law requires that support is of an incentive nature, and as such applications must be made before the project gets underway.
Receiving support for investment and job creation
There are a variety of financial incentives for business investment and job creation. Support is permitted for either investment outlays (buildings, land and equipment) over three years or the cost of job creation arising from the investment over three years (estimated wages and social security contributions over two years).
Investment and job creation incentives for large companies
Investment projects by large companies may be given support in certain parts of the country except in certain sensitive sectors (e.g. steel making and synthetic fibres). The location of a project is a determining factor in assessing the extent of support available. From the beginning of 2009 until the end of December 2010 temporary arrangements will be introduced enabling companies to receive support of up to €500,000 throughout the whole country.
a) Investment support and intervention rates depend on location in EU -recognized areas for regional funding
In accordance with the zoning for regional aid (aides à finalité régionale - AFR) in France approved by the European Commission for the period from 2007 to 2013, the limit on aid ranges from 10 to 15% of the investment for large business and from 20 to 35% for SMEs. The maximum total amount of support for productive investment and job creation is calculated by the geographical location of projects and the size of the companies receiving support. If an investment project exceeds €50 million,government intervention must be reduced to comply with EU rules (see below).
b) Government support within regional aid zones
To obtain the maximum amount of support available in a given area (10 to 15% of the investment for large companies) companies can receive various types of support simultaneously. This aid comes in the form of subsidies (from the State or from local authorities), aid for real estate or tax/social security contribution exemptions. Each of these measures comes with its own set of conditions.
c) Grants for industry and services (Prime d’aménagement du territoire or PAT)
PAT grants are distributed by the DATAR (Délégationinterministérielle à l’aménagement du territoire et à l'attractivité régionale) and are available to businesses for company creations,expansions, conversions ortakeovers of existing businesses.
Grants are based on the number of jobs created and are made on a case-by-case basis, taking into account the features of each project (number of jobs created and total amount of investment). The ceiling is €15,000 per job created.
Eligibility:
1. In the case of company creations, investments on the site designated for funding must involve either:
- the net creation of at least 25 permanent jobs if eligible investment is more than €5 million;
or
- the net creation of at least 50 permanent jobs if eligible investment is less than €5 million.
2. In the case of expansions to existing operations or changes to the nature of business, investments on the site designated for funding must meet one of the following conditions:
- the net creation of at least 25 permanent jobs and an increase of at least 50% in employment on the site.
- the net creation of at least 50 permanent jobs.
- eligible investments of at least €10 million.
3. PAT grants may be available for takeovers of existing businesses subject to all three of the conditions below being met:
- a severe deterioration in the local labour market.
- the planned takeover will lead to a sustainable, structural improvement in the competitiveness of the business and contribute to the diversification of its customer base.
- the takeover involves the preservation of at least 80 jobs and eligible investments of at least €5 million.
The amount granted may not exceed the equity of the recipient company together with any partners’ accounts frozen for the duration of the investment program.
d) Local government support
Local authorities may grant various forms of support to business investment projects in regional aid zones. These may include subsidies or supplements to PAT grants and support to finance business premises (land and buildings) such as reduced purchase prices, within the limits applying to national regional aid for the area concerned. Rent support is limited to €200,000 per business over three years (de minimis). This ceiling has been increased to €500,000 until the end of 2010. Local authorities have the power to use the European aid available in their areas.
e) Main tax and social security contribution exemptions
The advantage of tax and social security contribution exemptions is that they can be triggered automatically by the company as soon as the required conditions are met. Tax exemptions apply to the local economic contribution (CET) and/or corporate tax as well as property tax. Exemptions from the local economic contribution and/or corporate tax are generally subject to authorization by the local authorities. Their decision stipulates the duration (between two and five years) and the extent of the exemption being granted. Some exemptions do not require authorization by the local authorities and apply automatically for a five-year period.
Corporate tax exemptions are possible in some regional areas, mainly in military restructuring and high-unemployment areas, and last for seven years. Investors taking over an ailing industrial business receive a two-year corporate tax exemption.
Social security contribution exemptions consist of reduced employer contribution rates which require investment projects to be located in areas particularly affected by economic restructuring programs. In cases where projects are located both in EU-recognized regional aid zones and in these priority development zones, the social security contribution exemptions can be combined with the measures described above in EU-recognized areas.
Otherwise, exemptions are limited to €200,000 per company over a three-year period (de minimis). Within the context of the European recovery plan, the ceilings for some of these “de minimis” measures have been temporarily extended to €500,000 (until the end of 2010).
f) Public-sector redevelopment companies
Several large public-sector industrial groups have set up industrial redevelopment companies to support economic development in their regions (e.g., SOFIREM, FINORPA, SODIE, SODIV). These companies provide support to new investors in the form of medium- and long-term loans, submarket rates, unsecured lending, and equity funding through the acquisition of temporary minority interests.
Support for investment and job creation outside designated regional aid zones
In the rest of France, support for investment may still be possible for small and medium-size businesses. Aid is capped at 7.5% of the investment for medium-size businesses and 15% for small businesses (or €200,000 over three years if this is more favourable).
- Support for SME s (FDPMI – government fund for the development of small and medium-size businesses): France’s central government and regional authorities may grant subsidies to small and medium-sized enterprises to help them purchase technology-rich equipment. Such support is available throughout France, and it is particularly focused on designated regional aid zones.
- Real-estate support for SMEs (except for Ile de France excluding Deprived Urban Zones (ZUS) or Rural Revitalization Zones (ZRR)
- Support can also be provided through the European Regional Development Fund (ERDF)if the Operational Program, negotiated region by region, has been approved by the European Commission.
- Loans and guarantees for SMEs depending on the company’s project: some measures may be extended to large companies by the European Recovery Plan.
For specific criteria for what qualifies as a large company and an SME, as well as a detailed map showing French Regional Aid Zones, see the Invest in France pdf: ‘Doing Business in France’ (page 78)
Receiving funding for training and recruitment
The French government has developed a variety of instruments to provide financial incentives for businesses to create jobs and train employees.
Funding for job creation
a) Government employment funding
Businesses of all sizes can receive support for job creation unrelated to any investment project. The main forms of funding in this area are:
- Exemptions or relief on social security contributions, with a particular focus in certain regional aid zones: Urban Revitalization Areas (ZRU), Rural Revitalization Areas (ZRR), Urban Enterprise Zones (ZFU) and, since January 1, 2007, Employment Priority Zones (BER).
- Subsidized employment contracts, e.g. professionalization’ contracts.
b) Employment incentives
Some forms of aid and partial exemptions from social security contributions depend on the category of employee recruited. They are granted automatically and independently from the investment incentives described above. In this respect, reduced employer contributions for low-wage earners mean that companies pay reduced social security contributions for wages under 160% of the minimum wage (SMIC). These reduced employer contributions amount to around 19% on behalf of employees being paid the minimum wage.
Funding for employee training
Enhancing workforce skills is a key priority in France and this is reflected in a variety of programs to support business training initiatives. These programs can partly cover costs including payments to training leaders, travel expenses for training leaders and employees being trained, other overheads, depreciation of training equipment, related consultancy fees and the time taken off work by employees being trained.
The level of funding depends of the type of training and the size and location of the business. To benefit from maximum allowable levels of support for their training programs, businesses of all sizes may take advantage of the various forms of aid described below:
a)Local authorities may provide support for initiatives providing between 50 and 1,200 hours of theoretical and practical training and for those helping employees to adapt to a new position requiring the equivalent of at least 120 hours in lost work time.
b)European funding channelled through regions. The European Social Fund and European Regional Development Fund may cover a portion of operating expenses relating to training, salary expenses for employees participating, and ancillary expenses.
c) Tax credit for spending on management training in SMEs. This applies to individual entrepreneurs, managers, CEOs and directors of SMEs. The tax credit is limited to 40 hours of training per year. Depending on circumstances, it may be offset against personal income or corporate tax.
d) DEC contracts (formerly EDDF). Businesses can also call on their professional and inter-professional organizations to receive technical and financial support covering 25% to 80% of training expenses. Where the amount of support granted to a company exceeds €2 million, the European Commission must be notified.
Receiving support for innovation, research and development
France has adopted an industrial policy with a strong focus on support for research, development and the capacity for innovation of businesses operating within its borders. For additional information see the locations4business section on R&D.
Government support for innovation, research and development in the private sector is chiefly provided by the research tax credit. This is calculated at 30% of annual research expenditure (50% then
40% in the first two years) on R&D operations carried out in France and is a supplement to the local economic contribution (CET) exemption for R&D equipment.
In addition to this general tax environment, the French authorities have created public funding tools for R&D projects within the EU framework. The Ministry for the Economy, Industry and Employment, the Ministry for Higher Education and Research and the Ministry for Ecology, Energy, Sustainable Development and the Sea, assisted by public-sector organizations including the National Research Agency (Agence nationale pour la recherche) the Industrial Innovation Agency (Agence pour l’innovation industrielle) and OSEO, are ready to act. Regional and local authorities can provide additional support in this area.
These support measures help finance corporate R&D projects throughout France.
Aid for R&D available throughout France
Subsidies may cover a portion of R&D expenditure including related payroll expenses, equipment procurement, expenses for contracted research, intellectual property and patent rights, as well as overheads. The level of support depends on the stage of R&D underway, which may concern fundamental research, industrial research or experimental development.
Government contributions to large businesses conducting shared experimental R&D projects may cover up to 40% of the total cost. To benefit from maximum permitted levels of support for their research and development programs, businesses may take advantage of the various forms of aid described below:
a)Regional development grants for research, development and innovation (Prime d’Aménagement du Territoire - PAT) can be as much as €15,000 for each job created or involved in the R&D project (or €25,000 per job in the case of a cooperative project). They are available for R&D projects leading to the net creation of at least 20 permanent jobs or eligible expenditure of at least €7.5 million.
b)Grants from the Ministry for the Economy, Industry and Employment(Company competitiveness fund; R&D strategic line for international projects with high added value)
c) OSEO support for companies with fewer than 5,000 employees is in the form of grants, repayable advances or assistance towards the recruitment of R&D personnel (Aide au Recrutement pourl’Innovation).
d) National Research Agency (Agence nationale dela recherche) assistance supports fundamental and applied research, public-private partnerships and dissemination of public research results to business and industry. It operates on the basis of calls for proposals.
e)Local-authority support for R&D projects may be in the form of grants, interest-free loans and advances or loans and advances at rates below the bond-market average, and interest subsidies setting rates at between zero and the bondmarket average.
f)Support from the Ademe (French Environment and Energy Management Agency) for R&D projects, in particular for R&D project feasibility studies.
g) Support for innovation in service-sector processes and organization may be available from local authorities and the DATAR. Limits are 15% of related spending for large businesses, which can only benefit if they are working with an SME, 25% for medium-sized enterprises and 35% for small enterprises.
h) New innovative companies receive special benefits to encourage their development in France (tax relief, social security contribution exemptions, and exemptions on capital gains from equity transfers)
Support for environmental investments is being developed
French authorities may award grants for investments which seek to exceed the legally required minimum environmental standards. These may cover up to the 35% of expenditure for large businesses and 45% for SMEs, which may also receive support for upgrading to meet legal requirements.
Eligible investments are expenditure on property, plants and equipment to reduce pollution, noise, odors, and to protect the environment. Consideration may also be given to expenses relating to technology transfers through operating licenses and the acquisition of expertise, patented or otherwise.
The level of funding depends on the type of environmental investment:
- SMEs may receive funding of up to 15% for a period of three years to support investments to meet EU standards;
- Businesses of all sizes may receive support covering up to 30% of investments which exceed applicable EU standards;
- Three types of investments may benefit from higher rates: energy saving investments, combined heat and electricity generation and investment in renewable energy may benefit from investment support of up to 40% of eligible costs.
- Investments in renewable energy sufficient to supply an entire community may benefit from aid covering up to 50% of total spending.
Government agencies and other public bodies able to provide support for environmental investments include the Agency for the Environment and Energy (Agence de l’Environnement et de la Maîtrise de l’Energie- ADEME), the Water Agency (Agence de l’Eau), and guarantee funds for investments in energy savings and renewables (FOGIME and FIDEME).
FURTHER RESOURCES
Information on R&D incentives, tax incentives and flexible working conditions, supplied by Invest in France. For further information please see: ‘France welcomes Investment’ (pg 9-10, pg 14) and The French Tax System(pg 2)
