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Brussels, 12 March 2008

State aid: Commission authorises French tax scheme reducing solidarity tax on wealth with a view to promoting investment in SMEs

The European Commission has decided not to raise any objections under the EC Treaty rules on state aid to the French tax-relief to a taxpayers' scheme in respect of the solidarity tax on wealth (ISF) for those who invest in SMEs. Relief will be conditional upon investments being made in SMEs.

EU Competition Commissioner Neelie Kroes said: "The tax scheme encourages investment in SMEs, in particular those with the greatest potential for growth, on near-market terms. It is expected to provide support for SME activities and thus for the industrial fabric and employment."

The scheme is part of the fiscal package adopted by France in August 2007. It proposes relief on ISF up to a maximum of EUR 50 000 per year for any investment made directly or indirectly in an SME. The reduction in ISF is proportional to the investment made and varies according to the method of investment. There is a proportionately lower rate of relief for investments made through investment funds. The estimated cost of the scheme is EUR 445 million in 2008, but the scheme is expected to stimulate new investment in SMEs of the order of EUR 635 million.

The scheme was notified on 11 October 2007 to the Commission, which analysed it in the light of the Guidelines on state aid to promote risk capital investment in SMEs (see IP/06/1015), which encourages aid in the form of tax incentives. Given the specifics of the scheme, which includes aid to medium-sized enterprises undergoing expansion, the Commission carried out a detailed examination.

The scheme promotes the activity of SMEs by encouraging investors to provide them with risk capital. It also aims to promote the activities of business angels in France and thus to support the risk capital market. The Commission has assured itself that the distortions in competition caused by the scheme will be limited since it creates near-market conditions by offering a variety of investments, all of which are eligible for tax benefits. ISF taxpayers can invest either directly in an SME, via an investment fund or via holding companies such as investor clubs. Moreover, the scheme is part of a wider package of measures to promote SME activity.

The tax package introduced relief on ISF for investments in SMEs and for charitable donations. The measure relating to charitable donations remains subject to the de minimis Regulation, providing aid up to EUR 200 000 with no requirement of prior notification.

The non-confidential version of the decision will be made available under case number N 596a/2007 in the State Aid Register on the DG Competition website once any confidentiality issues have been resolved. The electronic newsletter "State Aid Weekly e-News" lists the most recent decisions on state aid published in the Official Journal and on the website.

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