The "SME - Wealth" tax reduction, under article 885-0 V bis of the French Tax Code, enables a taxpayer to reduce his due wealth tax of 50% of the amount invested in SMEs, under certain conditions. The 2015 Amending Finance Act has significantly restricted the measure with the key measures below :
- Qualifying subscriptions - which now exclude the contributions in kind and companies engaged in the field of the construction of buildings for sale or rent but now are opened to SMEs that are listed on Enternext (i.e. the stock market for SMEs) - are restricted to new investments. The measure is now limited to taxpayers who are not shareholders of the recipient company, except the case of follow-on investments (those anticipated in the business plan of the recipient company).
- The measure is focused on SMEs with less than seven years while no age limit was previously required. Nevertheless, it is always possible to get the reduction in case of "significant" investment in SMEs with more than seven years, namely when the investment aims to finance the integration of a new market by the company and its amount exceeds 50% of the average annual turnover over the last five years.
- Two new conditions about the recipient company are also introduced:
- The recipient company must not be considered as a "firm in difficulty" under the General Block Exemption Regulation (i.e. European Regulation on State aid);
- The total amount of payments received for qualifying subscriptions must not exceed EUR 15 M.
The "Holding - Wealth tax" measure is also modified as a result of these changes on qualifying companies.
To finish, a cap on costs and commissions - the maximum authorized amount, expressed as a percentage of the qualifying payment reduction will be fixed by Decree - is provided. If the amount exceeds it, a fine applies.
These changes are applicable for subscriptions made on or after January 1, 2016.