FCPI and FIP: Tax Reduction by Investing in French SMEs

What Are FCPI and FIP?

FCPI (Fonds Communs de Placement dans l'Innovation -- Innovation Venture Capital Funds) and FIP (Fonds d'Investissement de Proximite -- Regional Investment Funds) are private equity vehicles designed for retail investors. They allow you to invest in unlisted French SMEs while benefiting from an income tax reduction.

• An FCPI invests at least 70 % of its assets in companies classified as innovative by Bpifrance.
• A FIP invests at least 70 % of its assets in SMEs located within a limited geographical area (maximum 4 adjacent regions).

These funds are managed by asset management companies authorised by the AMF (Autorite des Marches Financiers -- the French financial markets authority).

The Tax Advantage in 2026

Tax Reduction Rate

Subscribing to an FCPI or FIP entitles you to an income tax reduction of 18 % of the amounts invested. For FIP Corse and FIP Outre-mer (overseas territories), the rate rises to 30 %.

Investment Caps

The FCPI and FIP caps are independent: a couple can therefore invest up to 24 000 euros in FCPI + 24 000 euros in FIP, i.e. 48 000 euros in total.

Maximum Reduction Calculation

For a couple investing 24 000 euros in FCPI and 24 000 euros in FIP:

• FCPI: 24 000 x 18 % = 4 320 euros
• FIP: 24 000 x 18 % = 4 320 euros
• Total: 8 640 euros of tax reduction

Note: this reduction counts towards the global tax niche cap of 10 000 euros.

How They Work in Practice

Lock-Up Period

Funds are locked for 5 to 8 years minimum, depending on the fund's conditions. The effective duration can be extended by 1 to 2 years by the management company. In practice, expect 7 to 10 years of immobilisation.

Fees

FCPI and FIP typically carry high fees:

• Entry fees: 0 % to 5 % (negotiable with certain online distributors)
• Annual management fees: 2.5 % to 4 % of assets
• Performance fee (carried interest): 20 % of gains above a threshold

On a 10 000 euros investment with 4 % entry fees and 3.5 % annual fees over 8 years, cumulative fees absorb approximately 3 400 euros, i.e. 34 % of the initial capital.

Historical Performance

FCPI and FIP performance is highly variable. According to AMF studies:

• Around 50 % of funds return less than the invested capital.
• The median net-of-fees performance is often negative over the lock-up period.
• A few funds show performance of +30 % to +100 %, but they remain a minority.

Who Are They Suited For?

FCPI and FIP are suited to taxpayers meeting these criteria:

• TMI of 30 % or more: the tax advantage partially compensates for the risk of capital loss.
• Long-term savings capacity: funds are locked for several years.
• High risk tolerance: these are investments in unlisted SMEs, inherently risky.
• Diversification: FCPI/FIP should represent only a limited fraction of your wealth (5 to 10 % maximum).

Practical Example

Marc, single, TMI at 41 %, invests 10 000 euros in an FCPI:

• Immediate tax reduction: 10 000 x 18 % = 1 800 euros
• Guaranteed tax return: 18 % (regardless of the fund's outcome)
• If the fund returns 8 500 euros after 8 years (15 % loss): Marc recovers 8 500 euros + 1 800 euros tax saving = 10 300 euros total, a slight gain
• If the fund returns 12 000 euros: Marc gets 12 000 euros + 1 800 euros = 13 800 euros, i.e. +38 %

Pitfalls to Avoid

• Do not invest solely for the tax reduction: a fund that loses 40 % of its value more than wipes out the 18 % tax advantage.
• Compare management companies: favour those with a verifiable track record across several vintages.
• Negotiate entry fees: some online platforms offer 0 % entry fees.
• Do not concentrate on a single vintage: invest over several years to smooth the risk.

Conclusion

FCPI and FIP are a useful tax reduction tool for heavily taxed taxpayers, provided they accept the risk of capital loss and the extended lock-up period. The 18 % tax advantage provides a safety cushion but does not guarantee overall profitability. Diversify your choices and carefully analyse the past performance of the management companies.