What do you want to know?
Why invest in FIP or FCPI?
FCPIs (mutual funds for innovation) and FIPs (local investment funds) have investments without a capital guarantee, but with an attractive return potential.
They help reduce income tax (IR).
Subject to certain conditions, capital gains on disposal are exempt.
This system is accessible without time limit since the amending finance law for 2015
FIP and FCPI have several points in common, foremost among which is the tax advantage and the possibility of investing at all stages of the development of companies which are the subject of an equity investment.
On the other hand, they stand out in the type of companies financed.
Indeed, FIPs and FCPIs have the same basis since they are Common Placement Funds (FCP) that are part of Collective Investment Organizations in Transferable Securities (UCITS).
They will differentiate themselves according to the risks incurred, the objectives, the strategies or even according to the geographic zone or the targeted domain.
There are many advantages to investing in an FIP or an FCPI:
diversification of assets:
High risks, but diverse.
The performances are high since they are correlated with the risks incurred.
Tax exemption for payments.
Capital gains tax exemption.
The possibility of transferring its shares to someone else without losing the benefits of tax advantages.
FIP & FCPI: benefit from an attractive potential while providing tax exemption.
What is an FIP?
What is an FCPI?
The Local Investment Funds (FIP) are part of the Mutual Funds for Risk Investments (FCPR).
They were created with a view to supporting listed undertakings for collective investment in transferable securities (UCITS) and small and medium-sized enterprises not listed on the stock exchange.
All on a local or regional scale.
From the age of five, investors in FIP units can access tax advantages.
The Mutual Funds for Placement in Innovation (FCPI) promote the financing of the development of innovative companies not listed on the stock exchange.
Included in the Mutual Funds for Risk Investments (FCPR), these investment solutions are open over one year in order to collect funds and closed at the end of that same year.
The sectors concerned can be very varied, as much for local placement as for investment in innovation.
Investor Profile
Any natural person, whatever their family and professional situation, can subscribe to an FCPI or a FIP.
The deduction is reserved for people having their tax domicile in France.
Since January 1, 2017, all French tax residents can benefit from the FIP DOM-COM reduction.
The tax reduction is not called into question if the taxpayer transfers his tax domicile outside of France.
The income tax reduction is interesting for taxpayers whose income tax is high enough to charge the reduction as it is neither carry-forward nor refundable.
Taxation of mutual funds in innovation (FCPI)
IR reduction:
Rate
18% for payments made from January 1, 2021 to May 8, 2021
25% for payments made from May 9, 2021 to December 31, 2022
Plate
Amount of annual payments, retained in proportion to the quota of eligible investments in the fund (minimum 70%), net of subscription fees
Within the annual limit of:
€ 12,000 for single, widowed or divorced persons, i.e. a maximum reduction of € 2,160 (or € 3,000 for payments benefiting from the 25% rate)
€ 24,000 for couples married or linked by a PACS subject to joint taxation, i.e. a maximum reduction of € 4,320 (or € 6,000 for payments made from May 9 to December 31, 2022 benefiting from the 25% rate)
This annual ceiling for maximum payments on a FIP (€ 12,000 for a single person, € 24,000 for a couple) net of costs is assessed a priori after the allocation of the investment quota.
Amount of the maximum annual reduction € 10,000: global ceiling for tax loopholes for the same calendar year.
Capping of tax loopholes & retention period
The tax reduction for the subscription of FCPI or FIP units is taken into account for the overall cap on tax loopholes set at € 10,000.
Fractions of capped tax cuts are definitely lost.
The taxpayer must undertake to keep the units for 5 years from the subscription (period counted from date to date).
Taxation of local investment funds (FIP)
Income tax reduction
Rate
Classic FIP: 18% for payments made from January 1, 2021 to May 8, 2021
OR 25% for payments made from May 9, 2021 to December 31, 2022FIP Corsica: 30% (38% before August 10, 2020)
FIP DOM-COM: 30% (38% before August 10, 2020)
Plate
Amount of annual payments, retained in proportion to the quota of eligible investments in the fund (minimum 70%), net of subscription fees
Within the limit of:
€ 12,000 for single, widowed or divorced people,
€ 24,000 for couples married or linked by a PACS subject to joint taxation
This annual ceiling for maximum payments on a FIP (€ 12,000 for a single person, € 24,000 for a couple) net of costs is assessed a priori after the allocation of the investment quota.
Maximum annual reduction amount
Classic FIP: i.e. a maximum reduction (if 100% investment in eligible funds) of:
€ 2,160 for single, widowed or divorced people (or € 3,000 for payments made from May 9 to December 31, 2022 which will benefit from the increased rate to 25%)
€ 4,320 for couples married or linked by a PACS subject to joint taxation (or € 6,000 for payments made from May 9 to until December 31, 2022 which will benefit from the increased rate to 25%)
FIP Corse: a maximum reduction (if 100% investment in eligible funds) of:
€ 3,600 for single, widowed or divorced people
€ 7,200 for couples married or linked by a PACS subject to joint taxation for the same calendar year
FIP DOM-COM: a maximum reduction (if 100% investment in eligible funds) of:
€ 3,600 for single, widowed or divorced people
€ 7,200 for couples married or linked by a PACS subject to joint taxation for the same calendar year
Within the global limit of € 10,000 (amount of the global cap on tax loopholes)
Holding limit
The taxpayer must not hold more than 10% of the units of the fund, directly or with his spouse, his civil partnership, his ascendants or descendants during the retention period or at any time during the 5 years preceding the subscription.
The taxpayer must not directly or indirectly hold more than 25% rights in the profits of companies whose securities appear in the assets of the fund or have held this amount during the retention period or at any time during the 5 years preceding the subscription.
FIP shares not to be registered in a PEA PEA-PME, PEE, PEI, PERCO.
Taxation of income and capital gains distributed by the fund & capital losses:
Income tax exemption on income and gains from disposal realized during and after the retention period
Social security contributions remain due at the overall rate of 17.2% and are deducted directly at source by the manager
Subject to compliance with the following conditions:
Obligation to reinvest sums and their unavailability during the retention period
Retention of units for 5 years from subscription (5 years from date to date),
Holding limit of 25% profit participation (in the event of non-compliance, the exemption is no longer acquired for future distributions)
Compliance with the minimum investment quota of 70% by the fund
Regarding capital losses, the system for imputing capital losses is that of common law:
Capital losses are attributable to capital gains of the same nature made during the same year or the following 10 years.
The amount of the capital loss is attributable in full; the exemption or reduction mechanisms applicable to the sale are not applied.
Note: FIP & FCPI units may be subject to IFI under the conditions of common law.
But as a general rule, the composition of the FIP and the percentage held by the taxpayer can lead to non-taxation.
When you invest in the funds named above, you access what is called private equity. In other words, you bring equity to companies that want and need it for their development and growth.
According to the AMF there are 3 types of funds:
FCPR → Risky Mutual Funds
FCPI → Innovation Mutual Fund
FIP → Local Investment Fund
They are all, moreover, mutual funds for risky investments (FCPR).
FIPs and FCPIs just respond to a different normative framework.
They are used for an income tax cut motivation. The types of companies and the sectors of activity are not the same.
The Corsican FIP or DOM are for their part, an "extension" of the FIP. They use the same law, but applied to Corsica and to the Overseas Departments or regions. The tax reduction is increased.
The capital investment will mainly be used to finance and take stakes in the company:
company equity (more than half of the funds)
their private debt,
their infrastructure (proportionately, there is an increase for this expense).
It also serves to increase the value of the company and create jobs.
An FCPI is an FCPR which must therefore meet standards related to the type of assets. It is made up of at least 70% of financial securities, shares in a limited liability company and an advance in a current account that must comply with certain rules:
its listed securities must be listed on a European or French market. Invested companies must not exceed 150 million euros and a maximum of 20% of the FCPI,
companies must have their registered office in a country that is part of the EEA (European Economic Area),
they must also respect a maximum size of 2,000 employees and be subject to corporation tax.
The Local Investment Funds (FIP) are part of the Mutual Funds for Risk Investments (FCPR). They were created with a view to supporting listed undertakings for collective investment in transferable securities (UCITS) and small and medium-sized enterprises not listed on the stock exchange. All on a local or regional scale. From the age of five, investors in FIP units can access tax advantages.
The Corsican FIPs or the DOM FIPs are specific FIPs. They are different from “classic” regional FIPs in that they allow you to reduce your income tax by 30% (instead of 25% for other FIP). The condition for validating this reduction is that the fund must invest the entire regulatory ratio of 70% in Corsican SMEs (or in the overseas departments).
The subscription of shares of mutual funds in innovation (FCPI) is a means of tax exemption allowing the taxpayer to reduce his income tax up to 25% of the payments from August 10, 2020 and until the end. 2020 (against 18% previously), within the limit of € 3,000 (€ 2,160 in 2019) for a single person or a single person and € 6,000 (€ 4,320 in 2019) for a couple subject to joint taxation.
The local investment fund (FIP) is a tax exemption investment allowing subscribers of shares, subject to keeping them for at least 5 years, to benefit from an income tax reduction as well as an exemption. capital gains tax.
The income tax reduction is 18% of payments for an investment in a “classic” FIP, up to a ceiling (note: the rate of 18% is increased to 25% for payments made between May 9 and December 31, 2021; and between August 10 and December 31 for the year 2020). The rate is 30% for the “Corsica” FIP and the “overseas” FIP
Indeed, created by the finance law for 2007, the FIP Corse is a fund whose assets are made up of at least 70% of securities of SMEs exercising their activity exclusively in Corsica. The amount of the reduction corresponds to 30% of the sums paid, net of costs: a single person can thus reduce their tax by a maximum of 4,560 euros; this amount being doubled for people subject to common taxation.
Previously, the reduction rate for Corsica FIP was 38%. As of August 10, 2020, the new rate that applies to all payments is 30%.
Advantages & Disadvantages of FIP / FCPI
FIP & FCPI
Example of investment in FIP / FCPI
1
Initial situation
Pierre has significant assets, he is ready to invest in the long term the sum of € 24,000.
Its overall net income is € 140,000, its income tax is € 30,000 (its marginal tax bracket is 30%).
After having determined his profile and his risk aversion, Pierre, under the advice of his CGP, decides to acquire FCPI and FIP units.
2
Income tax reduction
Investment amount = € 24,000
Investment made in December of year N
3
Final situation
Amount of income tax reduction = 18% the amount of payments net of fees, Or 18% x € 24,000 = € 4,320
Fund gains: € 6,000
Income tax exemption on income and gains from disposal generated by the fund if the conditions are met and income tax exemption on capital gains
