Wealth tax (ISF) reduction for investment in SME capital (ISF-PME) and local investment funds (FIP)

Article 16 of the TEPA Act creates Article 885-0 V bis of the General Tax Code: wealth tax (ISF) payers may deduct from their tax 75% of payments made to subscribe to the initial capital or capital increases of unlisted European small and medium-sized enterprises, directly or through holding companies, up to €50,000 a year, provided the shares are kept until 31 December of the fifth year following the subscription. Subscriptions to local investment funds (FIP) give a 50% reduction up to €10,000 a year, within the overall €50,000 cap. The article also extends the wealth tax exemption for shares received in return for subscriptions (Article 885 I ter) to holding companies and FIPs. The measure applies to subscriptions made from 20 June 2007, first deductible from the 2008 wealth tax. The rate was cut to 50% in 2011 and the scheme disappeared with the abolition of the ISF on 1 January 2018.