SPECIAL ADDITIONAL CAPITAL COST ALLOWANCE FOR INDUSTRIAL SMEs INVESTING IN DIGITAL TRANSFORMATION
Who is eligible for this allowance?
Any French company fitting the EU’s definition of an SME that carries out an industrial activity and that is subject to tax on profits under the French taxation system (revenue or corporate income tax) can benefit from this measure.
The following types of businesses are not eligible: companies exempt from paying tax under a special scheme, companies operating under the French “micro-entrepreneur” taxation system, and companies subject to tax applicable to non-commercial activities (under the French BNC scheme).
The EU defines an SME as a company:
- with fewer than 250 employees;
- with an annual pre-tax turnover of less than €50 million, i.e. an annual balance sheet not exceeding €43 million
How does it work and what are the benefits?
The deduction equates to 40% of the cost price of the investment. The amount is subtracted from the company’s profit on a straight-line basis over the depreciation period, whether the business has opted to depreciate its investment in a linear or a diminishing way.
As a result, companies are not only able to depreciate the full value of their investments, they are also entitled to write off 40% of this value from their profit, bringing them dual benefits in terms of cash position and return.
This means that for an investment of €100,000, the tax savings, on top of the standard depreciation value, based on a corporate tax rate of 28%, will be €11,200, representing a saving of 11.2% on the initial purchase price.
The special deduction is applicable from the first day of the month in which the asset is purchased or built, regardless of the date on which it goes into operation.
To find out more: Guide to the special additional capital cost allowance (in French)