IR-PME 2026: Rates, JEI, JEII and Caps After the Reform

Quick answer. In 2026, the IR-PME income tax reduction is 18% of the amount invested in an unlisted French SME (capped at 50,000 euros for a single filer, 100,000 euros for a couple). Enhanced rates reach 30% for a JEI, 50% for a JEIR and 40% for the new JEII category created by the finance law of 19 February 2026.

Investing in the capital of a young company to lower your French income tax remains one of the rare schemes that combines support for the real economy with an immediate tax benefit. But between the standard reduction and the three enhanced regimes reserved for innovative companies, the right rate is rarely the one you expect. A business owner reinvesting part of their dividends, or an executive backing a start-up in their network, both gain from knowing the applicable rate, the real cap and the global niche-cap trap before signing the subscription form.

The IR-PME reduction, sometimes called the Madelin reduction, is set out in article 199 terdecies-0 A of the French Tax Code. It lets a taxpayer who is a French tax resident deduct from their income tax a fraction of the cash subscribed when investing in the capital of an eligible unlisted SME. The scheme covers direct subscriptions as well as those made through a holding company or a fund.

For the standard case, the rate is 18% of the amounts invested, within an annual limit of 50,000 euros for a single person and 100,000 euros for a married or civil-union couple filing jointly. A single filer can therefore obtain up to 9,000 euros of reduction in a given year, subject to the global cap we detail below.

The standard scheme applies to payments made between 1 January 2024 and 31 December 2028. This multi-year window changes how subscriptions should be planned across several tax years. Before committing a ticket, it is wise to confirm the target meets all eligibility conditions, which is part of our CIR, CII and JEI support service.

The reform tidied up a landscape that had become hard to read. On top of the standard 18% rate, three enhanced rates are reserved for innovative companies, each tied to a specific category and its own investment cap.

The headline change for 2026 is the creation of the young impact-innovation company (JEII) by law 2026-103 of 19 February 2026, the finance law for 2026. This category targets companies that devote between 5% and 20% of their expenses to research and development and meet social or environmental impact criteria. The 40% rate applies to payments made from 21 February 2026, the day after the law was published.

Do not confuse the JEIR (young breakthrough innovative company, 50% rate, deep-tech profile) with the JEII (young impact-innovation company, 40% rate, social or environmental impact profile). These are two distinct regimes with different approval conditions and R&D thresholds.

The right reflex is to start from the qualification of the target company, not from the amount you wish to invest. Here is the approach we follow on our files.

1. Confirm the company is an unlisted SME within the European thresholds: fewer than 250 employees, and turnover below 50 million euros or a balance sheet total below 43 million euros.
2. Check the age: the company must have been created less than 10 years ago for the standard case, and less than 8 years ago for the JEI, JEIR and JEII regimes.
3. Identify the exact category of the target (plain SME, JEI, JEIR or JEII) based on its R&D profile and any approval obtained.
4. Apply the matching rate (18%, 30%, 50% or 40%) and the investment cap specific to that category.
5. Keep the subscription form, the company's certificate and the up-to-date articles of association to support the reduction if the tax authority asks.

A common mistake is applying the JEI rate to a company that never obtained that status. The JEI label requires strict R&D and age conditions that we cover in our analysis of the 2026 reform of the JEI status. Without qualification, the standard 18% rate applies.

This is the point most investors discover too late. The IR-PME reduction, including at the enhanced 30%, 40% or 50% rates, falls within the global cap on tax advantages set at 10,000 euros per year by article 200-0 A of the Tax Code. In practice, all of your tax niches combined (home help, childcare, IR-PME and so on) cannot deliver more than 10,000 euros of tax reduction in a single year.

There is no higher cap reserved for the JEI, JEIR or JEII rates. An investor subscribing 100,000 euros to a JEIR mathematically generates 50,000 euros of theoretical reduction, but can only use 10,000 euros for the year. The good news: the portion exceeding the global cap can be carried forward over the next five years.

The costliest subtlety concerns the carry-forward of investments. For the standard 18% reduction, the portion invested above the annual cap can be carried forward over the next four years. For JEI, JEIR and JEII subscriptions, this excess fraction is not carried forward: it is permanently lost. Investing 200,000 euros at once in a JEIR, as a couple, therefore wastes half of the eligible base.

Several situations deserve specific attention before subscribing.

• Holding period. The shares must be held until 31 December of the fifth year following the subscription, meaning at least five years. An early sale generally triggers the clawback of the reduction, unless the shares were held for at least three years and the full sale price is reinvested in eligible securities within twelve months.
• Owner reinvesting dividends. Cutting income tax through IR-PME does not erase the tax on the dividends received upstream, subject to the single flat-rate levy of 31.4% in 2026. The trade-off between the 2026 flat tax and the PFU and tax-efficient reinvestment must be assessed as a whole.
• Investing through a holding company. Indirect subscription through a holding is possible, but the holding must meet strict transparency and timing conditions. We systematically build this into the business owner's wealth strategy.
• Interaction with the PEA-PME. The same security cannot combine the IR-PME reduction and placement inside a PEA-PME. The choice depends on the horizon and the liquidity sought, as we explain in our piece on the tax treatment of the PEA-PME.

Three mistakes recur in the files we take over.

The underrated risk: losing the base through concentration. Many investors place a large ticket in a single year, drawn by the 40% or 50% rate. Because the portion above the annual cap is not carried forward for the innovative regimes, and the global cap limits the deduction to 10,000 euros per year, spreading subscriptions over several years is almost always more tax-efficient.

What the tax authority looks at. The reality of the cash subscription, the company's eligibility on the date of payment and compliance with the holding period are the first items checked. A non-compliant company certificate or shares sold before five years are enough to justify a clawback. Keep every supporting document.

Confusing the company's status with the investor's benefit. The JEI status grants advantages to the company (social and tax exemptions). The IR-PME reduction benefits the investor. The two are not the same and are not triggered in the same tax returns.

Our reading. The real 2026 trade-off is not between the headline rates, but between the rate and the global cap. A 50% rate on a JEIR looks spectacular on paper, but the 10,000 euro annual cap brings most files back to the same effective reduction as a well-sized 18% subscription. The enhanced rate truly matters when your other reductions are already saturated, or when you plan across several years.

Recently, the owner of a services SME asked us to help invest 120,000 euros in the deep-tech venture of a former colleague, qualified as a JEIR. Their intention was to capture 60,000 euros of reduction at once. After analysis, we recommended splitting the investment into two subscriptions over two calendar years: concentration would have wasted the non-carryforwardable excess and hit the 10,000 euro annual global cap. Spreading preserved the full eligible base and smoothed the deduction across several years.

As a firm registered with the French Institute of Chartered Accountants, we stress that this scheme is a tool to support the financing of innovation, not a tax product to deploy without due diligence. Before any ticket, the audit of the target matters as much as the rate calculation, as we detail in our audit of a start-up before investing.

Hayot Expertise tip. Before subscribing, have the company's eligibility and its exact category (SME, JEI, JEIR, JEII) confirmed in writing as of the payment date. Size the amount against the 10,000 euro global cap, not the headline rate alone. And keep every form and certificate for the entire holding period.