Innovation Funding Incentives: France

France has proactively cultivated a robust and attractive environment for innovation, leveraging a comprehensive suite of funding incentives to spur research, development, and the growth of its vibrant startup ecosystem, often referred to as “La French Tech.” These incentives combine generous tax credits, direct government grants, and strategic public investments, all aimed at fostering technological leadership and economic dynamism. This report will detail the primary innovation funding mechanisms available in France and their collective impact on the nation’s innovation landscape.

Key Funding Incentives

1 | Research Tax Credit (Crédit d’Impôt Recherche – CIR)

The CIR is France’s flagship tax incentive for R&D, designed to encourage companies of all sizes and sectors to invest in scientific and technical research.

Mechanism: The CIR provides a tax credit equal to 30% of eligible R&D expenses up to €100 million, and 5% for expenses exceeding this threshold. This credit is deducted from a company’s corporate income tax liability. Any unused portion of the credit can be carried forward for three years, after which it becomes refundable in cash.

Eligibility: Eligible R&D activities are defined broadly, encompassing fundamental research, applied research, and experimental development. Qualified expenditures include personnel costs (wages and social security contributions for researchers and technicians), depreciation of fixed assets used in R&D, and operating expenses (calculated as a fixed percentage of personnel costs and depreciation). Payments to approved subcontractors for R&D work also qualify.

Impact: The CIR significantly reduces the cost of R&D for businesses, acting as a powerful stimulant for innovation across all industries. It has been particularly beneficial for SMEs, which account for a large proportion of claims. Recent adjustments to the tax base and rates (e.g., reduction of staff expense flat rate from 43% to 40% and removal of patent-related expenses from the CIR base as of February 2025) aim to refine its focus and generate savings.

2 | Innovation Tax Credit (Crédit d’Impôt Innovation – CII)

The CII is a complementary incentive specifically for Small and Medium-sized Enterprises (SMEs) engaged in innovative activities.

Mechanism: The CII offers a tax credit on certain innovation expenses. For expenses incurred from January 2025, the rate is 20% (reduced from 30% in previous years) of eligible expenditure, up to a limit of €400,000 per year.

Eligibility: It applies to costs related to the development of prototypes and pilot installations for new products that are not eligible for the broader CIR.

Impact: The CII provides additional support for SMEs focusing on the development and commercialisation of new products.

3 | Public Investment Bank (Bpifrance) Funding

Bpifrance, the French public investment bank, is a central and highly active player in the innovation funding landscape, providing a wide array of financial instruments and support services.

Grants and Loans: Bpifrance offers various grants and repayable advances (soft loans) to support innovation projects at different stages of development, from feasibility studies to industrialisation and market entry. These often cover personnel costs, IP expenses, and capital expenditures.

Innovation Competitions: Bpifrance manages national innovation competitions such as i-Lab (for technology projects with high innovation potential, offering grants up to €600,000) and i-Nov (for SMEs with larger projects in deep tech, health tech, etc., offering up to €2.25 million).

French Tech Programmes: Bpifrance operates key “French Tech” initiatives, including:

- French Tech Grant: Equity-free funding (e.g., up to €30,000) for very early-stage startups.

- French Tech Emergence Grant: Equity-free funding (e.g., up to €90,000) specifically for deep tech startups.

- French Tech Seed Fund: Co-invests with other investors in tech-enabled businesses through convertible notes (€50,000 to €500,000)

- French Tech 2030: A programme addressing major societal challenges like climate change and health, providing funding and support for high-impact innovations.

Equity Investments: Bpifrance invests directly into innovation funds (seed, venture capital, and growth) across all innovative sectors, acting as a key limited partner in venture capital funds and a co-investor alongside private VCs.

Impact: Bpifrance plays a crucial role in de-risking innovation, bridging funding gaps, and stimulating private investment, ensuring a continuous flow of capital for French startups and innovative companies throughout their lifecycle.

4 | Young Innovative Company (Jeune Entreprise Innovante – JEI) Status

The JEI status offers significant tax and social contribution exemptions for young, R&D-intensive companies.

Mechanism: JEIs historically benefited from exemptions from corporate income tax and local taxes for a certain period, as well as partial or total exemptions from employer social security contributions on salaries paid to researchers and developers.

Eligibility: To qualify, companies must be SMEs, less than eight years old, and dedicate a significant portion (e.g., 20% as of March 2025) of their expenses to R&D.

Impact: This status provides critical early-stage support, improving the financial viability of innovative startups and encouraging R&D investment from their inception. Recent budget changes in 2025 have adjusted some of the tax exemptions for newly created JEIs.

5 | Venture Capital Landscape

France boasts a dynamic and maturing venture capital (VC) ecosystem, positioning it as a leading startup hub in Europe.

Growth: Despite recent market recalibrations, France remains a top European VC market, with significant investment activity, particularly in Artificial Intelligence (AI), climate technology, and deep tech sectors.

Key Players: A mix of local VC firms (e.g., notable firms investing in SaaS, fintech, and enterprise tech) and increasing engagement from international investors contribute to the robust funding environment. Government co-investment through Bpifrance further enhances stability and scale.

Impact: A strong VC landscape provides the necessary growth capital for French startups to scale domestically and internationally, complementing the government’s incentive programmes. The focus on deep technical talent and a maturing founder generation further strengthens the ecosystem.

Conclusion

France’s comprehensive strategy for innovation funding, built upon substantial R&D tax credits, diverse grants and equity investments from Bpifrance, and targeted incentives for young innovative companies, creates a highly supportive environment for businesses. This multi-faceted public support, combined with a robust and active venture capital landscape, effectively de-risks innovation and provides the necessary capital for businesses to develop cutting-edge technologies and scale globally. This integrated approach is instrumental in securing France’s position as a leader in European and global innovation.