In order to encourage companies to invest in France, the French Government introduced in 1983 a research and development tax credit (CIR – “Credit Impôt Recherche”) to encourage the development of innovative companies.
Since 2013, the CIR has been extended to prototype design costs and pilot installations of new products. This tax credit is called CII and it is reserved for SMEs.
These tax credits make France one of the most competitive European countries. According to the OECD, France has one of the best R&D incentives in the world.
The research and development tax credit is applicable to industrial, commercial, artisanal or agricultural companies taxed under the actual regime and which carry out researches and innovation expenses.
All companies incurring R&D expenses are eligible, regardless of their duration, size, business sector and nationality.
The CIR rate
France’s research tax credit covers:
Expenses must concern research operations within the European Economic Area and must be included in the company taxable incomes.
The following expenses are taken into account by the CIR:
To qualify for CII, the company must be a SME according to the European definition:
The CII rate
France’s innovation tax credit covers:
Expenses must concern innovation operations within the European Economic Area and must be included in the company taxable incomes.
The CII could apply to all innovation expenses concerning prototype design of new products or pilot installations of same nature.
The innovative activity must concern new tangible or intangible products that meet the following conditions:
Thus, for there to be innovation, a product must not have already been introduced by other economic agents operating in the same competitive environment: it is necessary that the product is new for the market.
The following expenses are taken into account by the CII:
The tax credit is determined every calendar year, regardless of the date on which the financial year ends.
The tax credit is deductible from the French income tax.
The excess tax credit is carried on the next 3 years. After this period, the amount of tax credit that has not been used may be reimbursed.
Also, an immediate refund is possible under conditions.
The following companies could claim for an immediate refund:
|ELIGIBLE COMPANIES||All companies||Only SME|
|TAX CREDIT RATE||30% of all R&D expenses up to €100 million, and 5% above this threshold||20% of innovation expenses|
|TAX CREDIT CAP||None||The maximum tax credit obtained is equal to €80,000 per year|
|ELIGIBLE OPERATIONS||All research phases||Only prototype design or pilot installation operations of new products|