Impact Policy Tracker Policy

"Madelin" Income Tax Reduction



The "Madelin" tax reduction, also known as the IR-PME scheme, is a French tax incentive established under Article 199 terdecies-0 A of the General Tax Code (CGI) in 2014. It allows individuals domiciled in France to benefit from an income tax reduction when investing in the capital of small and medium-sized enterprises (SMEs), including those recognised as Social Utility Solidarity Enterprises (ESUS). Investments can be made during the company's creation or through capital increases, provided they are paid in cash.



Highlights

  • Broad Support for the Social and Solidarity Economy: By including ESUS (Enterprises of Social Utility and Solidarity) within the IR-PME tax incentive scheme, the French government affirms its long-standing support for the social and solidarity economy. The ESUS designation covers a wide range of mission-driven entities beyond social enterprises, including associations, cooperatives, mutual societies, and foundations.

  • An Evolving Incentive Framework: In place for over a decade, the IR-PME (Madelin) scheme has evolved through successive reforms to remain relevant -modifying eligibility criteria, investment thresholds, and introducing tax credits. Despite these updates, the scheme has consistently maintained its core objective: encouraging individuals to invest in SMEs by offering upfront income tax reductions. Under the Finance Law for 2025, one of the most recent and relevant updates for ESUS entities is the temporary enhancement of the tax reduction rate: individuals who invest in ESUS-certified organisations may now benefit from a 25% income tax reduction on payments made until December 31, 2025.

Government’s Role:
Market Regulator


Country:
France

Policy Type:
Fiscal Incentives

Year: 2014

Responsible Institution:
French National Assembly

Additional information:
Income Tax Reduction for Investments in SMEs (Madelin Scheme)

Fiscal Incentives

What are Fiscal Incentives for Stimulating the Impact Economy?

Fiscal incentives are public policy tools that governments can use to channel private capital towards social and environmental goals. These typically take the form of tax exemptions, which either reduce investors’ tax liabilities or offer exemptions directly to impact businesses.


In some cases, such incentives are tied to a specific legal status - such as Benefit and Collective Interest Companies (BICs) in Colombia - while in others, they are designed to encourage investment in Social Impact Bonds (SIBs), as seen in Portugal, or to enable investors to deduct a portion of their investment from income tax, as in the UK.