After months of political chaos, the French government has passed the first part of the country’s much-delayed budget for 2025 — reducing some tax breaks for startups and making fewer investments in tech.
France’s budget proposal passed through the lower house of Parliament on Wednesday and is expected to get the final green light from the upper house of Parliament on Thursday.
The text restricts the scope of tax breaks that concern R&D-intensive startups and slashes the budget of France 2030, a government programme dedicated to funding innovation, by more than €2bn.
It comes just one week before France plays host to the hotly-anticipated AI Action Summit, where president Emmanuel Macron will seek to bolster the nation’s credentials as a mainland Europe’s leading tech powerhouse.
While the new budget is a “great improvement” from the one proposed by France’s previous prime minister Michel Barnier in December, which caused him to be ousted by MPs, it will still require startups “to adapt,” wrote Marianne Tordeux-Bitker, director of public affairs at VC and startup lobby group France Digitale, in a LinkedIn post.
What does France’s budget mean for startups?
The new budget brings down investments made as part of the France 2030 programme by nearly 30%.
France 2030 is a €54bn multi-year plan launched in 2021 to support innovation, and which includes financial support for startups and larger businesses. It saw €7.3bn pumped into the French economy in 2024 — and the 2025 budget slashes this to €5.2bn.
The text also limits the scope of a tax break that startups benefit from when they have high R&D costs; patenting costs, for instance, will cease to be considered an R&D spend. The government expects this to generate up to €400m in savings.
Another measure, which enables small companies to deduct from their tax up to 30% of costs related to building ‘innovative prototypes and pilots for new products’, has been amended to reduce the rate to 20%.
“There is less support for innovation, particularly in the R&D phase and in the pre-commercialisation phase, which is really regrettable,” says Tordeux-Bitker.
“The signal is dissonant: one the one hand we have the upcoming AI Summit and on the other, massive budgetary cuts on innovation.”
The new budget also includes measures to broaden the implementation of a scheme launched in 2024 to reward private investments in startups with tax breaks — a system similar to the UK’s Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS).
While until now the scheme was largely designed for business angels, it has been expanded to include private individuals who will be eligible for the tax break when they invest in certain innovation-focused funds that are offered by most high-street banks.
A political saga
In December Barnier was replaced by centrist political figure François Bayrou, who was tasked with drafting a new budget for the country.
Bayrou has now pushed through the first part of his new text, which includes most budgetary measures. The remaining parts, which focus on social security spending, are expected to pass later this week, and will determine how much employer contributions startups have to pay.
Despite the notable budget restrictions, many startups will be breathing a sigh of relief after months of uncertainty.
With the country’s budget coming in over a month after the start of the year, founders have been unable to determine whether or not they could count on certain tax breaks, and if costs of employment would rise — leaving them in limbo when it comes to planning their own budgets for 2025.
“Startups are weary,” Tordeux-Bitker tells Sifted. “The saga has been on-going since September, they’ve already started projecting for 2025, they want to move forward.”
Read the orginal article: https://sifted.eu/articles/france-budget-startups-news/
