The finance bill for 2024 presented this Wednesday introduces the new tax credit for ” investment in green industries ” (GITC or C3IV in French). This incentive will support investments related to new production capacities in 4 sectors. The intention is to increase “green” energy production capacities in France (industrial sovereignty) – those green energy technologies serve as enablers for ecological transition of the other industrial sectors. It should be noted, however, that “green” hydrogen is considered by French Government as one the 5 key sectors for the French economy, but has been excluded from the scope of this incentive as dedicated subsidies support companies in that area (see update of the French hydrogen plan expected in October).
The ‘GITC’ supports the development of strategic sectors of the low-carbon economy
Eligible companies: industrial and commercial companies making new CAPEX investments
Industrial and commercial enterprises taxed on the basis of their actual or exempted profits would be eligible for the GITC. Companies in financial distress are excluded from the benefit of this scheme.
The companies applying for the GITC must also meet the following cumulative conditions:
- Undertake to comply with their tax and social security obligations and their filing obligations relating to each of the fiscal years for which the GITC would apply;
- obtain the authorizations required by environmental legislation, and comply with this legislation;
- Commit to exploit GITC – eligible investments for at least 5 years from the date of their commissioning. This period would be reduced to 3 years for SMEs;
- Undertake not to transfer their activity outside the national territory in the 2 financial years following that of commissioning of investments benefiting from the GITC;
- Ensure activities identical or similar to those eligible for the GITC have not been a priori transferred from an EU Member State.
Eligible activities
GITC would support investments in France in activities contributing to the production of:
Batteries
Both the manufacture of battery cells and modules and their components (used as direct inputs) are eligible. The same applies to the mining, refining, production and processing of graphite, active electrode materials, advanced materials and critical metals used in the manufacture of the batteries. Finally, the recovery of critical raw materials necessary for the production of equipment and equipment components would also fall within the scope of the tax credit.
Photovoltaic panels
The manufacture of photovoltaic or hybrid cells, the manufacturers of components (used mainly as inputs), the extraction, production and transformation of the component elements of photovoltaic panels and the recovery of equipment and components used in the manufacturing process would be eligible.
Wind turbines
The manufacture of elements (masts, blades, nacelles, laid or floating foundations, electrical substations, electrical cables), the manufacture of essential components (designed and used mainly as inputs), extraction, production and processing of materials (glass fibers, carbon or critical materials) and the recovery of raw materials would be eligible.
Heat pumps
The manufacture of thermodynamic pumps or water heaters, the manufacture of essential components (designed and used as inputs), the extraction, production and manufacture of critical materials and the recovery of raw materials would be eligible.
The GITC incentive will be subject to a prior approval (ruling)
The benefit of the GITC would be subject to prior approval by the French tax administration.
The application for approval would have to be made before the investment decision. Such application would be filed with the French tax authorities would also consult with the ADEME (main French environment agency).
This application for approval would include the submission of an investment plan justifying compliance with the conditions mentioned above, the implementation of investments in the context of an eligible activity, and its economic viability.
Approval would then be issued when these cumulative conditions were met. It would set the amount of eligible expenses, as well as the applicable tax credit rate.
In terms of deadline, the State would undertake to render its decision within 3 months.
The GITC incentive will allow substantial government funding for the targeted new CAPEX investments
The GITC incentive will support investment both in tangible and intangible assets
The tax credit base would consist of expense incurred for the production or acquisition of the following new tangible and intangible assets:
- buildings, plant, equipment, machinery, and land, provided that they have not been acquired from an affiliated undertaking;
- Patent rights, licenses, know-how, or other intellectual property rights would also be taken into account. For this, they should be entered on the balance sheet of the beneficiary enterprise, be mainly operated in the production facility for which the enterprise benefits from the tax credit, be depreciable and not have been acquired from a related enterprise.
The basis of assessment for the tax credit would consist of the cost price plus taxes and costs of any kind, with the exception of costs directly incurred for the preparation of use of the property and less public aid received in respect of those expenditures.
Aid rates and ceilings will be significant
The GITC will provide substantial government support with a % and ceiling that varies depending on the company size and its location, as set out in the table below:
The cumulation of GITC with other schemes classified as State aid within the meaning of European Union law might be permissible, but a thorough case-by-case analysis would be necessary.
An incentive which may be offset against corporate tax or be refunded
GITC would be computed each year over a period corresponding to the investment plan presented in the application for approval.
The yearly GITC (at the above rate and cap) will be computed based on the fraction the expenses of the agreed investment plan incurred in the particular fiscal year.
Each fraction would be set off against the amount of corporate tax in respect of the respective fiscal year or, the excess will be refunded.
Implementation of the GITC incentive is conditional on prior approval of this aid scheme from the European Commission
The GITC would constitute state aid within the meaning of European Union law. In accordance with the obligations under EU State aid law, GITC will be notified to the European Commission in order to obtain its prior authorisation for its implementation by France.
The Government has placed the GITC incentive under the Temporary Crisis and Transition Framework (“TCTF”) adopted by the European Commission on 9 March and allowing the granting of significant support for investments in strategic sectors for the transition to a net-zero emissions economy. The accelerated GITC would benefit investment plans approved by December 2025 at the latest.
The measure would enter into force on a date fixed by decree no later than three months after the European Commission’s authorisation is obtained. In addition, it will be necessary to follow the precise and final conditions for granting this tax credit under the terms of the finance law that will be voted by the end of 2023.