Financing

Decoding: Young Innovative Company (JEI) status

23.5.2024
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In this article, we explore in detail what the JEI status entails. Whether you're a start-up, SME or simply interested in the world of innovation, this guide is for you.

Definition: what is the Young Innovative Company status?

The Young Innovative Company (JEI) status is a recognition granted by the French government to companies that actively invest in research and development (R&D). It aims to support start-ups and SMEs by offering them tax and social benefits.

Duration of JEI status

The Young Innovative Company (JEI) status is available for the first eight years from the date of the company's creation and the first year of activity, as long as the company meets the requirements of the status.

It is important to note that this period may vary according to specific criteria, for example, for companies with large-scale research projects or strong growth potential.

What are the advantages to which a JEI is entitled?

Tax exemptions

The tax exemptions available to JEI include the following:

Corporate income tax exemption: Companies are partially or fully exempt from corporate income tax for their first profitable years. (This exemption is abolished for companies created on or after January 1, 2024).

Exemption from property tax: JEI can benefit from an exemption from property tax for a set period, generally seven years, provided that this exemption has been voted by the local authority concerned.

Exemption from business property tax (CFE ): they can also benefit from an exemption from CFE during the same period as the property tax exemption, under the same conditions.

Employee benefits

In addition to tax exemptions, young innovative companies (JEI) also benefit from social advantages that help support their development and growth:

Exemption from employer social security contributions: companies can benefit from an exemption from employer social security contributions and family allowances for employees assigned to research and development projects. This exemption applies to remuneration paid to certain types of employees, such as research engineers, technicians, R&D project managers, etc., provided they devote at least 50% of their working time to these activities.

Exemption for corporate officers: corporate officers of SMIs can also benefit from an exemption from employer social security contributions and family allowances if they are primarily involved in the company's research and development activities.

Conditions: how do I know if my company is eligible for the JEI scheme?

What are the main criteria?

Here are the main criteria for determining eligibility for JEI status:

1. Company size: the company must be a small or medium-sized enterprise (SME), i.e. it must have fewer than 250 employees and sales of less than €50 million for the financial year, with a balance sheet total of less than €43 million.

2. Age of the company: the company must have been set up less than 8 years from the date of its actual creation. It must not be the result of a merger, restructuring, extension of pre-existing activities or takeover of pre-existing activities.

3. Research and development (R&D) expenditure: the company must incur research expenditure representing at least 15% of its deductible expenses in the year in which it is incurred. At least 10% of these expenses must be directed or held directly by specific persons, such as students, recent graduates or persons assigned to teaching or research activities.

What are the additional conditions?

In addition to the main criteria, there are further conditions that a company must meet to qualify for the Young Innovative Company (JEI) status:

Continuously held capital: At least 50% of the company's capital must be continuously held by individuals, another company meeting the defined criteria, another JEI, associations or foundations recognized as being in the public interest, venture capital companies, investment funds or other specific entities.

Carrying out a new activity: the company must be a newly-created business, not the result of a merger, restructuring, expansion or takeover.

These additional conditions, combined with the main criteria, determine whether a company is eligible for the Young Innovative Company (JEI) status and the associated benefits.

What are the obligations associated with JEI status?

To qualify as a Young Innovative Company (JEI), a company must meet certain obligations:

Continuing R&D activities: The company must continue to invest in research and development (R&D) activities in order to maintain its JEI status. This often involves devoting a significant proportion of its resources to these activities, in line with the criteria defined for obtaining the status.‍

Compliance with eligibility criteria: The company must continue to comply with the eligibility criteria defined for JEI status. This includes maintaining its status as a small or medium-sized enterprise (SME), complying with sales and balance sheet limits, and maintaining the percentages of R&D expenditure in relation to deductible expenses.‍

Maintaining capital ownership conditions: The company must also ensure that it maintains the capital ownership conditions defined to obtain JEI status. This means that at least 50% of the company's capital must continue to be held by the shareholders specified by law.

Links with other systems

Research tax credit (CIR) & Innovation tax credit (CII)

The research tax credit (CIR ) and the innovation tax credit (CII) are two key tax measures that can be combined with the Young Innovative Company (JEI) status.

Research tax credit (CIR): JEI status offers tax and social benefits for companies engaged in research and development (R&D). The CIR, for its part, enables companies to recover part of their R&D expenditure in the form of a tax credit. A company with JEI status can therefore take advantage of both JEI and CIR benefits to support its R&D activities.

Innovation tax credit (CII): The CII is designed to encourage innovation activities prior to the marketing of a new product. This scheme can be combined with other tax incentives, such as JEI status and the CIR. However, it should be noted that the eligible activities are intrinsically different from those eligible for the CIR.

Young university enterprise (JEU)

The Jeune Entreprise Universitaire (JEU) is a special scheme designed to support companies created from research work carried out in higher education establishments or public research laboratories. Unlike the JEI status, which is open to all young innovative companies, the JEU is specifically aimed at university-based companies.

To qualify for JEU status, the company must meet the following criteria:

  • Valorize the research work in which managers or associates have participated within a higher education institution accredited to issue a degree conferring at least the grade of Master.
  • Have a close link with a university or public research laboratory.
  • Be a young company, often recently created, generally less than 8 years old.
  • Commit a significant proportion of its expenditure to research and development.

The advantages offered to companies benefiting from JEU status are similar to those of JEI status, including tax exemptions, financial aid and simplified access to certain innovation support schemes.

Young Growth Innovation Company (JEIC) & Young Disruptive Innovation Company (JEIR)

The new JEIC and JEIR statutes mentioned in the Midy report represent a significant change in the landscape of tax incentives for innovative companies:

Young Innovative Growth Company (JEIC) This status applies to growing companies that spend between 5% and 15% of their total expenditure on R&D. It is designed to support SMEs that show strong development and innovation potential, but do not fully meet the strict criteria for JEI status. In return, they must demonstrate a strong capacity for growth, the indicators for which will be defined by decree.

Young Innovative Breakthrough Company (JEIR) JEIR are new companies (less than 12 years old) which devote more than 30% of their costs to R&D. This status is designed to help companies carry out more ambitious research and invest more in disruptive innovation, by giving them the means to Fund their more costly activities. To this end, JEIRs benefit from enhanced tax incentives, to stimulate private investment in their favor.

How do you register and obtain JEI status?

Application process for JEI status

The application can be made with or without a rescrit. With a rescrit, you make a prior request to the authorities to secure your status. Without a rescrit, you simply tick a box and apply the benefits. However, this could expose you to an inspection by the administration two or three years down the line, which could be more demanding than if you had made a rescrit.

Here are the steps to follow:

1. Check your company's eligibility: Before you apply, make sure your company meets the criteria required for JEI status. These criteria include being an SME, less than 8 years old since its creation, and committing at least 15% of its expenditure to research and development (R&D).

2. Put together your application: Gather all the documents you need to support your application, such as proof of sales, R&D expenditure and the date your company was founded.

3. Submit your application: Once your file is complete, you can submit your application to the relevant tax authorities. Be sure to follow the instructions provided by the administration and provide all the required information.

4. Get your JEI status: If your application is accepted, you will receive official notification of your status as a Young Innovative Company. You will then be able to benefit from the tax and social advantages associated with this status for a fixed period.

If you decide to run the risk of a tax audit 2 or 3 years down the line, and therefore make an application without a rescrit, as mentioned above, you simply have to declare yourself as a JEI to the authorities and apply for the tax and social benefits.

Rescrit JEI

The JEI rescrit is an administrative procedure enabling companies to ask the tax authorities to confirm their eligibility for Young Innovative Company (JEI) status. In other words, it's an official request to the tax authorities for a formal position on whether the company meets the necessary criteria to benefit from the tax and social benefits associated with JEI status.

This approach is very important for companies, as it offers several advantages:

1. Legal certainty: By obtaining an official response from the tax authorities, the company has formal confirmation of its eligibility for JEI status. This offers considerable legal certainty, as the company can rely on this decision in the event of a subsequent tax audit.

2. Tax optimization: JEI status grants significant tax advantages, such as tax exemptions on profits and social security contributions. By obtaining confirmation of its eligibility via the rescrit, the company can plan its operations and investments with full knowledge of the facts, maximizing the tax benefits available to it.

3. Saves time: rescrit provides a clear and rapid response from the tax authorities on the company's eligibility for JEI status. This avoids the uncertainties and delays associated with other forms of eligibility verification, enabling the company to concentrate on its core business.

Practical tips for maximizing the benefits of JEI status

To maximize the benefits of JEI status, here are a few practical tips:

1. Plan your R&D expenditure: Given that JEI status requires your company to devote at least 15% of its expenditure to research and development (R&D), it is essential to plan these investments strategically. Identify the priority R&D projects that will contribute most to your company's innovation and growth.

2. Keep accurate records: To benefit fully from the tax advantages of JEI status, you need to keep accurate records of all your R&D expenditure. This includes the salaries of employees working on R&D projects, subcontracting costs, expenditure on equipment and materials, and other costs associated with research and development.

3. Be proactive in your administrative procedures: To avoid any delays in obtaining JEI status, make sure you submit your application as soon as your company meets the eligibility criteria. Be ready to provide all the documents and information needed to support your application.

4. Consult the experts: If you have any questions or doubts about your eligibility for JEI status, or about how to maximize its benefits, don't hesitate to consult tax experts or consultants specializing in this field. Their expertise can help you make informed decisions and optimize your tax strategy.

5. Keep abreast of legislative developments: Tax regulations and eligibility requirements for JEI status can change over time. That's why it's essential to keep abreast of the latest legislative updates and adapt accordingly, so you can continue to benefit fully from the advantages of JEI status.

Developments and trends in JEI status

Since the Midy Report-induced reform of the Young Innovative Company (JEI) status came into force on January 1ᵉʳ 2024, several developments and trends have marked the landscape of this scheme. Here is an overview of the main developments and trends observed:

1. Broadening eligibility: The reform has broadened eligibility for JEI status, enabling a greater number of companies to benefit from its advantages. This includes the introduction of new eligibility criteria and the opening up of the status to different types of company, encouraging wider participation in the scheme.

3. Reinforced tax incentives: To further encourage private investment in start-ups and help them raise more funds, funds invested in start-ups can benefit from a reinforced income tax reduction of up to 50% and €50,000.

4. Adapting to new technologies: With the emergence of new technologies such as artificial intelligence, biotechnology and blockchain, JEI status is being adapted to include these innovative fields. Companies operating in these sectors are also eligible for JEI status, provided they meet the eligibility criteria.

5. Focus on sustainability and eco-innovation: A growing trend is the emphasis on sustainability and eco-innovation. Companies developing innovative solutions in the environmental and energy fields are also eligible for JEI status, reflecting the growing concern for sustainable development.

6. Support for entrepreneurship: JEI status is part of a broader trend to support entrepreneurship and innovation. Governments and institutions are actively encouraging the creation and growth of innovative businesses by offering tax incentives and other forms of financial support.

Dynergie, your partner for obtaining and securing JEI status

Dynergie can help you obtain and maintain your JEI status. If you would like to take advantage of our expertise, you can consult our offers here.

Useful links:

> Decoding: Green Industries Tax Credit (C3IV)

> Decryption: IP Box

Damien Villiers-Moriamé

Senior Consultant funding innovation - Head of Innovation Tax, IT, Electronics - Partner - Lyon

I assist innovative companies of all sizes in their efforts to obtain public funding (CIR-CII, JEI, bpifrance, CIN, etc.). My technical knowledge intervenes in various fields such as IoT, AI, e-education, embedded systems or service robotics. My daily work consists in accompanying entrepreneurs on key and crucial steps of their projects (construction of Financing Plan, construction of Business Plan, validation of the economic model).

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