A tax credit is a sum deducted from the amount of tax payable by a company. It is granted by thetax authorities on the basis of the incentives they provide.
Created in 1983 under the presidency of François Mitterrand, it has been renewed several times and made permanent in the 2000s. It was removed from the ceiling in 2008, and since 2013 has included innovation-related expenses.
In return for their efforts, companies can deduct part of these expenses from their corporation tax or income tax.
The aim of this tax incentive is to improve the productivity of France's production base, and boost the international competitiveness of French companies.
In 2013, almost 6 billion euros were distributed via the research and innovation tax credit, making it a significant benefit for many structures.
Here's everything you need to know to check your eligibility and take advantage of this scheme
The first condition for benefiting from the CIRI is to be subject to corporate or income tax. They must be taxed in the industrial and commercial profits category, and based on their normal or simplified actual profits.
Under these conditions, all industrial, commercial, craft and agricultural companies are concerned, without distinction according to their legal status.
Young innovative companies (JEI), those located in an area already benefiting from specific aid, and companies set up to take over an ailing structure are not eligible for the CIRI.
Despite these criteria, it is still possible to apply to the tax authorities for the CIRI if your company has fewer than 250 employees, annual sales of less than €50 million, or a balance sheet total of less than €43 million, and on condition that you spend on innovation for the design of new products.
Before applying, make sure your R&D expenditure falls within the scope of the scheme.
To do this, you can submit an advance written request to the administration.
The investments taken into account are as follows:
- Fundamental research activities (analysis of the properties and structures of a new element, etc.);
- Applied research activities (development of applications based on fundamental research);
- Experimental development (the design of new products and services resulting from previous research activities).
It is specified that the new elements developed must directly propose a substantial novelty, and not merely concentrate several already existing techniques.
In practical terms, to benefit from the CIRI, the company must overcome technical problems with the help of resources.
It's all about making a real effort to innovate
If your investments fall within the standards defined by law, you can attach form 2069-A-SD to your annual income tax return to the Service des Impôts des Entreprises (SIE ) and the Direction Générale pour la Recherche et l'Innovation (DGRI) of the French Ministry of Higher Education and Research.
Additional details are required if investments exceed 100 million euros each year. In this case, form 2069-A-1-SD must be added to the previous form.
The rate of CIRI granted is calculated on the basis of the volume of research expenditure declared and eligible during a calendar year, regardless of the year-end.
For any annual investment of less than €100 million , companies can save 30% of the total expenditure in tax credits. This rate rises to 50% for French overseas departments.
Investments in excess of 100 million euros generate a tax credit equal to 5% of the expenses incurred.
SMEs investing in innovation benefit from a tax credit of 20%(40% in Frenchoverseas departments), with a ceiling of €400,000.
Since its creation, the CIRI Observatory has highlighted the stability of R&D spending, despite the weakening of France's industrial base.
Still little used by SMEs, it nevertheless engages the entire national production system in a virtuous circle, enabling it to maintain its competitiveness in the face of growing international competition and the opening up of markets.
Today, some 16,000 companies are benefiting from this incentive scheme, which is designed to support the resumption of economic growth.
Written by our expert Paul LASBARRERES-CANDAU
May 7, 2018
