Before making or expanding an investment in France, foreign investors should inquire about the myriad of investment incentives available to investors in France, both French and foreign. The governmental policy behind such incentives is threefold: the creation of jobs, the maintenance of jobs through the reorganization or reorientation of industries that are experiencing financial difficulties, and the development of industrial and commercial activities outside of the major metropolitan areas such as Paris and Lyon.
The various incentive programs available in France are, to a large extent, coordinated at the national and local level by the Délégation à l’aménagement du territoire et à l’action régionale (DATAR). Thus, it is advisable for a foreign investor contemplating an investment in France to contact a DATAR office, either in France or abroad to benefit from the assistance it provides in selecting, applying for, and implementing investment incentive.
SUBSIDIES
The French government will pay a cash grant or subsidy known as a regional development subsidy (prime d’aménagement du territoire referred to as PAT) to French or foreign investors in the following situations:
– firstly, a PAT is granted to qualifying industrial companies and companies servicing other companies for investments made in the some geographical areas ;
– secondly, a PAT is granted to qualifying small and medium-size service companies for investments made in the geographical areas listed in a decree;
– and thirdly, a PAT is granted to companies carrying out research and development projects related to activities set forth in regulations, as well as to companies which finance the construction of buildings used for business purposes or which buy new equipment in order to lease it in connection with programs eligible for a PAT.
Depending on the geographical area where the investment is made, a PAT may be in the amount of no more than 15,000 euros per job created, within a limit of 11.5%, 17% or 23% of either the amount of the eligible investment exclusive of taxes or the wage cost of the job created calculated over a two-year period. Notwithstanding these ceilings, the PAT granted may not in any case exceed the total of the aggregate of the shareholders equity and of the blocked shareholders loan accounts during the three-year period set to implement the investment and create the jobs. The value of the investment consists in the pre-tax value of land, buildings, equipment, as well as patents. Forty percent of the PAT granted in connection with an investment can be paid when the investment program starts. The balance is paid in one or two installments as the investment program is carried out.
LOANS
In order to encourage investment, certain lending institutions, such as the Crédit national, the Crédit d’Equipement des Petites et Moyennes Entreprises called today OSEO and the Sociétés de Développment Régional are authorized to extend subsidized loans to French or foreign investors. In order to raise the funds they lend in connection with investments made in France, these institutions may issue bonds guaranteed by the French State. In addition, a number of institutions in France will, under certain circumstances, guarantee the borrowings of investors in order to facilitate the financing of their investments.
TAX INCENTIVES
In addition to subsidies and loans, investors may, under certain circumstances, benefit from various tax incentives in connection with the creation or reorganization of a business. It is advisable to request assistance from a tax lawyer in this respect.
In addition to the subsidies, loans and tax incentives already discussed, other types of financial aid may be obtained by French and foreign investors. The three most important types are briefly discussed below.
Firstly, local governmental authorities may facilitate the creation of new businesses by facilitating the purchase or rental of buildings or building lots. Specifically, local authorities may help an investor find the appropriate building or may also sell or rent the necessary building below cost. Such aid provided by the local authorities to the investor based on the fair market value of the building or its rental value is limited.
Secondly, the sixteen Société de Développement Régional (SDR) that exist throughout metropolitan France are authorized to take equity participations for a limited period of time in companies whose primary activities are located within a limited geographic area, so as to provide them with financing for inter alia, public tourist equipment or buildings used for industrial or commercial purposes. An equity participation taken by an SDR in a company may not exceed 35 percent of the capital of such company. SDR may also grant subsidized loans to or guarantee the obligations of companies whose primary activities are located within a limited geographic area.
Finally, a company may obtain financial support for industrial research from the Agence nationale de la valorisation de la recherche (ANVAR). Projects, which may relate to all stages of industrial research, are examined on the basis of various criteria, such as the technical quality of the project, the economic and commercial interest of the products or processes which are the subject matter of the research project, and the ability