France’s budget saga is drawing to an end as the final part of the much-delayed spending plan for 2025 was given the green light by parliamentarians.
The budget has caused political turmoil in France, where parliamentarians have spent months wrestling over the details of the text — with major implications for the nation’s startups.
To founders’ relief, the text maintains a key measure to keep labour costs down for startups with a focus on research and development (R&D) work.
The measure exempts eligible startups (known as “early-stage innovative enterprises”, or JEI) from paying employer contributions on the salaries of their R&D employees, which typically represent about 40% of the cost of an employee’s salary to the company.
Its scope, however, has been reduced. Previously, businesses could qualify for JEI status if they had fewer than 250 employees and spent at least 15% of their budget on R&D. This rate has now increased to 20%.
Criteria for what is considered R&D spend have also been redefined, with costs such as those incurred by GPU usage no longer included.
Startup and VC lobby group France Digitale estimates that nearly half of French startups currently have JEI status, and that “several hundreds” of businesses will be affected by the change. The government expects that it will generate €50m in savings.
“It’s not a good signal for France’s attractivity, because it constitutes one more change in the tax regime that is applied to French startups,” Marianne Tordeux-Bitker, director of public affairs at startup and VC lobby France Digitale, tells Sifted.
“But the ecosystem is now ready to move on and build its attractivity on the basis of longer-lasting metrics that are not dependent on public authorities, like performance, growth and profitability.”
It comes two weeks after the government passed the first part of the 2025 budget, which limits some tax breaks for startups and reduces investments in tech.
Maintaining JEI exemptions
A previous proposal for the budget, put forward in October by then-prime minister Michel Barnier, included slashing the JEI exemption altogether. Ecosystem observers told Sifted at the time this would have had a “colossal” impact on the tech sector.
Barnier was ousted by MPs in December after he tried to push the budget through without a vote in parliament, and replaced by centrist political figure François Bayrou, who was tasked with drafting a new budget for the country.
France has been under pressure to fix its finances after the European Council launched formal action against the country last July for breaking the bloc’s budget rules on excessive deficit.
In this context many founders and VCs will be relieved that the JEI measure has been maintained, but some say that tightening the conditions to access the status sends the wrong signal.
“It’s €50m in savings but it means creating lots of unemployment,” a parliamentary insider tells Sifted. “It’s crazy. We’re destroying lots of jobs.”
“It’s incomprehensible to not go back on this for just €50m.”
In an open letter to Bayrou published yesterday, 16 startup associations including France Digitale raised concerns that the multiple budgetary cuts will significantly slow down the sector.
“In a geopolitical context where the US is massively increasing investments and China is deploying colossal means to dominate strategic industries, it is incomprehensible that we choose to put a brake on our efforts when it comes to innovation,” they wrote.
Read the orginal article: https://sifted.eu/articles/french-budget-jei-status-news/
