Investment grant: accounting and tax spreading (2026)

Quick answer. Accounting for an investment grant runs through account 131 on the liabilities side, then a gradual write-back through account 777, in step with the depreciation of the funded asset. For tax, the option under article 42 septies of the French Tax Code lets you spread taxation instead of taxing everything in the year it is granted.

Accounting for an investment grant is one of the points that comes up most often in year-end files, because a mistreatment distorts the balance sheet, the income statement and the taxable result at the same time. An equipment grant received to fund a machine, a utility vehicle or fit-out works is not an ordinary income item recorded among sales. It is a stable resource, posted to equity, that turns into income over the years. This page explains, step by step, how to record it, how to spread it in the books, and how to elect the tax-spreading option provided by article 42 septies of the French Tax Code (CGI).

An investment grant, also called an equipment grant, is an aid awarded to fund the acquisition or creation of a fixed asset: production equipment, a vehicle, tools, fit-out works, IT hardware. It is most often paid by the European Union, the State, a local authority (region, department) or a public body.

The accounting logic is simple once stated: as long as the funded asset has not started to wear out, the grant is not meant to boost the result. It is therefore placed in liabilities, within equity, then released to the income statement as the asset depreciates. This reflects the matching principle between income and expenses.

Our reading#

In the files we handle, the most frequent confusion is not the entry itself, but the choice of account. A grant received is too often booked as immediate income when it funds a durable investment. The reflex to have: before any entry, identify what the grant funds. An asset capitalised on the balance sheet points towards account 131 and spreading. A grant covering current expenses (rent, salaries, running costs) follows a different logic.

This is the first decision, and it drives everything else. The two types of aid are not booked in the same class and are not taxed the same way.

An operating grant is income in account 74: it enters the taxable result immediately, with no spreading possible. An investment grant, on the other hand, opens the way to both accounting and tax spreading. Choosing the wrong class means bringing tax forward or deferring it improperly.

Here is the operational sequence, from payment to annual write-back, for accounting for an investment grant on a depreciable asset.

1. Recognise the grant awarded. On notification, record the receivable on the funding body (account 441 - State, grants receivable, or a suitable third-party account) against account 131 - Equipment grants. The grant is thus held in liabilities, within equity.
2. Record the cash receipt. When the funds are paid, clear the receivable by debiting the bank account (512) and crediting account 441. Account 131 is untouched at this stage: it stays in liabilities while the asset depreciates.
3. Acquire and capitalise the asset. The funded fixed asset is posted to assets (class 2) at its acquisition cost and depreciated over its useful life. The grant and the asset run in parallel: one in assets, the other in liabilities.
4. Write back the annual share. At each year-end, release a fraction of the grant to the result, calculated at the same pace as the asset's depreciation. Entry: debit account 139 - Investment grants recognised in the income statement, credit account 777 - Share of investment grants written back to the result of the period. Account 777 is income that partly offsets the depreciation charge.
5. Clear at the end of spreading. When the asset is fully depreciated, the grant has been entirely written back. The balance of account 131 is neutralised by account 139: the grant has left equity, having passed entirely through the result.

This write-back mechanism is indexed directly on the depreciation schedule: to keep it reliable, you need a clean, up-to-date depreciation plan. The logic of the depreciation charge governs the pace of the write-back here.

Accounting and tax do not automatically say the same thing. By default, with no election, an investment grant is taxed in full in the year it is awarded. That is heavy on cash: you pay tax on aid while the asset has not yet produced its effects.

Article 42 septies of the CGI offers a spreading option. Equipment grants awarded by the European Union, the State, public authorities or a public body, to create or acquire specified fixed assets, may, on election, be excluded from the result of the year of award and instead be added back to the taxable profit on a spread basis.

For a depreciable asset, tax spreading mirrors accounting spreading exactly: the share written back to account 777 and the fraction added back to the taxable result coincide. The task is then to ensure the election was formalised and the tracking schedule is consistent year on year.

The underestimated risk#

Many directors assume spreading applies as of right. It does not: it is an election. Without an election, the aid is taxed in one go in the year of award. In an already profitable year, a significant grant can tip the result and increase corporate tax for the year. Checking that the election was made is one of the controls we run systematically at year-end whenever public aid appears in the accounts.

A few situations deserve specific attention, because they change the treatment.

• Disposal of the asset before spreading ends. If the funded asset is sold before the grant is fully written back, the balance not yet taxed becomes immediately taxable in the year of disposal. Spreading stops at once. This is a point to anticipate in any equipment renewal.
• Non-depreciable asset. For land or another non-depreciable asset, there is no depreciation schedule to set the pace. Tax spreading is done in equal fractions: over the inalienability period set in the contract, or, absent an inalienability clause, over the ten years following the award.
• Grant covering several assets. When a single aid funds several fixed assets with different lives, the grant must be split per asset and a separate write-back tracked for each. A global tracking distorts the pace.
• Reclassified aid. Aid presented as an investment grant but actually funding current expenses must be treated as an operating grant (account 74), hence taxed immediately. The wording of the agreement is not enough: the actual use of the funds decides.
• Small businesses. The choice to spread or not also has a presentation effect: spreading smooths the result over the asset's life, which may be preferred to give a steadier picture to partners (bank, investors).

Common case#

An SME receives a regional grant to fund a production line depreciated over seven years. Without an election, the whole aid would have inflated the result of the year of award and the corresponding tax. With the article 42 septies option, the aid is added back in sevenths, mirroring depreciation: the tax burden is smoothed, and account 777 each year softens the weight of the charge. When, two years later, the company considers selling part of the line, the grant balance not yet written back becomes taxable at the time of disposal: a parameter to factor into the decision.