The young innovative company status: a fiscal lever to lower your R&D costs

This article by our expert Souad Djenadi explains how to benefit from the Young Innovative Company status and how to reduce your R&D costs.

The Young Innovative Company (JEI) status is an advantageous tax scheme for start-ups and SMEs that incur R&D expenses.
This is one of the main schemes presented to you by my colleague Damien Villiers-Moriamé in his webinar "Which financing at which time?" and his article "Mobilizing public financing for an innovative start-up".
What is behind the JEI status and how can you find out if you are eligible for it? This article will answer these questions and explain how the JEI status can help you reduce the cost of your R&D expenses.

1. Eligibility criteria for JEI status

To begin with, you should know that for your company to benefit from the status of Young Innovative Company (JEI), it must simultaneously meet the following 5 conditions:

• Etre une PME :
  Une société est considérée comme PME au sens communautaire si elle emploie moins de 250 salariés et si elle réalise un chiffre d’affaires <50 millions d’euros ou dispose d’un total de bilan inférieur à 43 millions d’euros.

• Be less than 8 years old:
  The Young Innovative Company status can be applied for until the end of the 7th year following the creation of your company.
  You will find below the "calendar" of the Young Innovative Company status according to the creation date of your company:

• Have R&D expenses > 15% of tax-deductible expenses
  This method implies that at the end of each fiscal year, your company's research and development expenses represent at least 15% of the tax-deductible expenses for that same year. These expenses are calculated on the basis of those retained for the Research Tax Credit (CIR). To do this, it is important to identify the activities that fall under R&D and the eligible expenses associated with your projects.

• Be independent:
  This condition implies that at least 50% of the capital of your company is held by natural persons; a small or medium-sized company whose capital is held for at least 50% by natural persons; JEI; associations or foundations recognized as being of public utility of a scientific nature or public research and teaching establishments or their subsidiaries; investment funds on the condition that there is no arm's length relationship between the JEI and these companies or funds (an arm's length relationship exists when the financial company has a majority stake or is able to exercise power in the JEI).

• Be truly new
  In other words, to be eligible, the creation of your company must not result from a concentration, an extension of pre-existing activities or a takeover of activities.

These 5 conditions must be fulfilled simultaneously at the end of each fiscal year for your company to be qualified as a young innovative company. An article will soon be available to explain how you can benefit from the advantages of the JEI status through a concrete case.

2. The advantages of JEI status

The Young Innovative Company scheme is an interesting lever whose main advantages concern :

• An exemption from charges on personnel
  The JEI status allows you to reduce employer's charges by about 50%, which is not negligible for a young company that has strong recruitment needs.
  It should be noted that the exempted jobs are not limited to those declared in the Research and Innovation Tax Credit. The exemption applies to personnel who are directly involved in the research and development project. The jobs concerned are: research engineers, technicians, research and development project managers, lawyers in charge of industrial protection and technology agreements related to the R&D project, personnel in charge of pre-competitive tests, employees directly assigned to the design of prototypes or pilot installations of new products. The exemption from charges may also apply to certain corporate officers who participate primarily in the company's research and development project and in the design of prototypes or pilot installations for new products.

• A corporate tax exemption
  The Young Innovative Company status allows your company to benefit from a tax exemption for 24 months with:
  - a 100% exemption the first year
  - a 50% exemption the second year

NB: For more information, please visit the URSSAF website

3. The procedure to follow to benefit from the JEI status

In order to know if your company qualifies as a young innovative company, you can ask the tax authorities for an opinion via a tax ruling procedure. Please note that this request for an opinion is not a prerequisite for benefiting from the exemption.
Indeed, if your company meets the conditions set out in point 1, you can in principle declare your company as a Young Innovative Company. However, the Rescrit process allows you to secure your approach and to have a formal position from the administration concerning the eligibility of your company to the status of Young Innovative Company. This approach also validates the R&D nature of your work and therefore the eligibility of your project for the Research Tax Credit.

Do not hesitate to contact us for a free diagnosis to know if you could be eligible for this device.

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