Everything you need to know about the tax shelter for start-ups and growing businesses
Anyone who invests in the capital of start-up companies can benefit, under certain conditions relating to personal income tax, from a federal tax reduction of 30% (for investment in small companies) or 45% ( for investment in micro-enterprises) on the amount invested via the tax shelter for start-ups and growing businesses. There are still other tax shelter regimes, such as those for audiovisual works and stage productions. In this article, we specifically address the following topics:
What is the tax shelter for (companies) start-ups;
- The conditions and exceptions applicable to beneficiary companies;
- The company director does not benefit from a tax advantage;
- The extension of the scheme to growing companies;
- The personal income tax return as an investor.
What is the tax shelter for (companies) start-ups?
The objective of this Tax Shelter for start-up companies is to attract, directly or indirectly, capital from individuals to invest it in small companies not listed on the stock exchange. Indeed, these companies often struggle to find the necessary capital. It is possible to take indirect participation by acquiring participation rights in an approved starter fund. For direct participation in the capital of a company, new shares must be acquired, possibly via a crowdfunding platform such as Bolero Crowdfunding, Spreds, and LITA.co. A citizen/investor can invest a maximum of 100,000 euros per year. They benefit from a tax reduction of 30% or 45% on the amount invested in the company concerned if they invest directly or indirectly in the capital of start-up companies. It is possible to invest via:
the acquisition of shares via approved crowdfunding platforms; Where
- A public starter fund
- A starter private price
- A company can collect a maximum of 250,000.00 euros during its existence. This federal tax reduction applies to expenses for the acquisition of new shares that were issued from July 1, 2015, on the occasion of the incorporation of the company or a capital increase carried out during the four years following the incorporation of the company.
Conditions and exceptions applicable to beneficiary companies
The Tax Lien shelter for start-up companies is an incentive measure aimed at supporting companies facing financing problems, which explains why the legislator excludes from the tax shelter system companies that have already carried out capital reductions. But, in 2018, it relaxed the strict rule that the start-up company must not yet have carried out a capital reduction, by authorizing the capital reduction aimed at clearing a loss suffered or building up a reserve to cover an expected loss. . However, the reserve constituted to cover a foreseen loss must not exceed 10% of the subscribed capital after the capital reduction. This reserve cannot be distributed between the partners except during a subsequent capital reduction: it can only be used to offset a loss or increase the capital by conversion of reserves.
Companies that have already distributed dividends are also excluded from the tax shelter. But the law does not exclude companies that have bought back their own shares (without canceling them). It is therefore possible to circumvent the exclusion by replacing a dividend distribution with a buyback of own shares. As a result, this tax incentive measure is also not intended for investments in heritage companies. Only small companies are affected by this measure. However, the ruling Service considered that a non-profit organization transformed into an SCRL with a social purpose can entirely come under the tax shelter regime as soon as this transformation takes place.
The company director does not benefit from a tax advantage
The directors of the company concerned cannot take advantage of the tax shelter. Indeed, the legislator considers that this category of (potential) investors does not need an incentive to take a stake in the company’s risk capital. The category of excluded business executives is relatively broad:
- (a)Taxpayers who are business managers (including indirectly), therefore who exercise the mandate of administrator, operator, liquidator, or a similar function at the time of the capital contribution;
- b) paid company directors whose terms of office begin after the capital contribution;
- c) permanent representatives of a company who act as directors, etc. ;
- d) taxpayers who exercise a mandate or function as a company director through a management company.
In 2019, the rules relating to mandates exercised through companies were tightened, in particular the criterion of assessment at the time of the capital contribution (as introduced by the recovery law) which was again abolished. Consequently, the investor cannot exercise a mandate at any time. The following table indicates under which mandates it is possible to benefit from the tax shelter.