FCPI: mutual funds for innovation

What is an FCPI?

FCIP: definition

An FCPI (innovation mutual fund) is a collective investment organization belonging to the category of risky mutual funds (FCPR). It allows individuals to invest indirectly in innovative SMEs, mainly unlisted, established in the European Economic Area.

Created by the finance law to direct savings towards financing innovation, the FCPI constitutes a tool forlocal investment with high potential, but involving a high level of risk.

FIP/FCPI investment

FCPIs should not be confused with FIPs (local investment fund).

• THE FCPI invest in innovative SMEs throughout the European Economic Area.
• THE FIP finance regional companies, sometimes with specific variations, such as the FIP Corsica or the FIPs dedicated to overseas territories, which offer distinct tax regimes.

The choice of FCPI or FIP therefore depends on the heritage strategy sought: sectoral support for innovation or territorial logic.

FCPI: concrete example

An investor makes a payment of 10,000 euros into an FCPI during year N:

• If the applicable reduction rate is 25%, he can obtain a tax reduction of 2,500 euros.
• This amount is deducted from the tax due when filing your income tax return.
• The shares must be held for at least five years.

But the value of the shares will depend on the future performance of the companies financed. THE capital is not guaranteed : the amount at a time T may be less than the initial investment.

Investor profile concerned

FCPIs are aimed at investors looking for an investment of long term and accepting a high level of risk, but wishing to combine support for innovation and tax advantages. It must have an investment capacity compatible with the capping of niches.

This is a potentially dynamic asset, but whose profitability depends heavily on the economic success of the SMEs financed and their ability to increase their turnover or promote their technological assets.

What is the difference between an FCPI and an SCPI?

FCPIs and SCPIs are two collective investment vehicles, but they respond to very different economic, tax and heritage logics.

FCPI (common investment fund for innovation)

An FCPI is a fund belonging to the FCPR category (risky mutual funds). It invests mainly in unlisted innovative SMEs, established in the European Economic Area, respecting specific eligibility criteria. The objective is the search for valorization and tax advantage.

The subscriber makes payments into the fund, with a retention commitment generally of at least five years to preserve the tax advantage.

SCPI (real estate investment company)

A real estate investment company (SCPI) is a vehicle forcollective real estate investment. It collects funds from investors in order to acquire and manage real estate (offices, businesses, logistics, specialized residences). Its objective is the receipt of regular income (rent).

The investor becomes a partner in a civil company and receives potential income from rents.

How do FCPIs work?

The FCPI mechanism is based on several stages:

• Subscribers make payments into the fund.
• The management company selects companies respecting eligibility criteria strict (a significant level of research expenditure, a turnover ceiling, and innovative activity).
• The fund must invest at least 70% of its assets in eligible innovative companies, in accordance with the Monetary and Financial Code.
• The shares must in principle be subject to a conservation commitment of at least five years to preserve the tax advantage.
• The investor does not directly choose the companies financed: he delegates the selection and management to approved professionals.

Are FCPIs a good investment?

Tax advantages linked to FCPIs

Subscribing to FCPI shares entitles you to a income tax reduction. This reduction applies to payments made, within the annual limit set by the finance law in force on January 1 of the tax year. The reduction rate depends on legal provisions and concerns all taxpayers.

The advantage must be mentioned in the income tax return and is included in the overall capping of tax loopholes.

FCPI performance

The yield depends exclusively on future performance companies. This is a long-term private equity asset, with no capital guarantee: the amount at any given time may be less than the initial investment. FCPIs are suitable for investors looking for a tax advantage and accepting a high level of risk.

How to invest in an FCPI?

Composition of the fund

The regulations resulting from Monetary and financial code imposes a minimum investment structure:

• 60% minimum of the assets must be invested in securities of innovative companies (shares, convertible bonds, SARL shares).
• 40% maximum can be placed freely (bonds, UCITS, Sicav, cash), depending on the fund’s strategy.

This distribution aims to combine growth potential and partial risk management.

Eligibility criteria for funded companies

To enter the assets of an FCPI, the financed companies must comply with several eligibility criteria :

• Employ less than 2,000 employees.
• Have their headquarters in a State of the European Economic Area.
• Be subject to corporate tax.
• Not be listed on a regulated market.
• Do not carry out any real estate or personal property management activity.

These requirements are intended to guide thelocal investment towards the productive economy.

Definition of an innovative company

To be considered innovative, a company must have engaged in research expenses significant over the last three financial years and demonstrate a recognized innovation effort. It must also respect the thresholds relating to turnover and R&D intensity provided for by the regulations.

Subscription to FCPI shares

The subscription is mainly aimed at highly taxed investors looking for a tax exemption scheme. The reduction rate depends on the legislation in force. It is important to assess your overall tax situation. The life of a fund is eight to ten years, although the minimum tax liability is five years.

Risks to consider

The amounts invested are blocked for a long period. Resale of shares before liquidation of the fund is difficult. The capital is therefore immobilized for several years. In addition, investing in an FCPI amounts to financing companies whose future performance is uncertain. Profitability depends on the ability of the financed SMEs to develop.

How to declare an FCPI for taxes?

A change in the FCPI tax regime in 2026

From 2026, the income tax reduction scheme (IR-PME) no longer applies subscriptions to “classic” FCPI shares, unless these funds comply with new conditions linked to Young Innovative Companies (JEI):

• Only FCPIs which invest a significant part of their assets in JEI continue to be eligible for a tax reduction.
• FCPIs which do not concentrate their investments on JEIs are no longer eligible.

Taxation of FCPIs

On entry, the tax reduction applies to are investedsubject to compliance with the conditions. During the holding period, any income distributed is rare. Upon exit, capital gains are exempt from income tax, but remain subject to social security contributions. In the event of early transfer, the initial reduction may be called into question, with some exceptions.

Conditions to benefit from the tax reduction

The tax advantage granted to taxpayers is subject to compliance with all of the following conditions:

• Keep the shares for at least five years (conservation commitment).
• Do not hold, alone or with your spouse, ascendants or descendants, more than 10% of the fund’s shares.
• Do not hold more than 25% of the rights to the profits of the companies appearing in the fund’s assets.

The reduction is deducted from income tax when filing income tax, within the annual limit set by the finance law on January 1 of the year concerned.

Amount of tax reduction

The amount of the tax reduction is equal to 25 % of amount invested within the FCPI (excluding entry fees) during the tax year. The payments taken into account to determine the amount of the tax reduction are limited annually to:

• 12,000 euros for a single person (single, widowed, divorced);
• 24,000 euros for a couple.