R&D in France: Generous innovation funding incentive up for grabs

The Crédit d'impôt Recherche (CIR) or Research Tax Credit is a key tax incentive designed to encourage French company investment in growth and innovation. This could be the development of new products, services or processes for example, or by substantially improving something that already exists.

According to latest OECD statistics, SMEs in France are particularly benefitting from the relief, accounting for 86% of all R&D tax relief recipients in 2019. A highly generous scheme, it's something no innovative French company should miss out on - particularly against a backdrop of pandemic-related economic woes.

Having spent over 10 years working on R&D tax claims across the UK and Ireland, Myriad is itself on the grow. We’re excited to announce the launch of our base in France, helping French companies achieve the R&D tax relief they deserve.

What is the Research Tax Credit (CIR) in France, and how much can companies receive?

Innovative projects are often expensive, but the CIR helps to cover a substantial number of different R&D costs. France-based companies can claim up to 30% on eligible R&D expenses, to a maximum of 100 million euros per year. Beyond this limit, the rate is 5%.

The CIR is deducted from the taxes the company is due to pay. The excess CIR not charged can be deducted from taxes for the following three years. After this period, the unused portion of the tax credit is refunded.

It is immediately refundable for SMEs (in the community sense), young innovative companies (JEI) and companies in conciliation procedure / receivership / judicial liquidation.

Is my company eligible for the Research Tax Credit?

Eligibility is essentially about the research and development activities undertaken within the European Economic Area. It doesn’t matter what legal status the company has, nor its industry or size.

The CIR is not just aimed at start-ups either. Any innovative company in France can be eligible, regardless of how it is structured (SA, SARL, etc.). It doesn’t even matter whether they are subject to corporation tax (IS) or income tax (IR).

The point to note here is that your company’s project must be:

• Novel
• Creative
• Transferable
• Systematic

The project must also have been unpredictable from the start. In other words, a professional working in the field could not have easily deduced the solution.

What activities will qualify for the Research Tax Credit in France?

According to the Frascati Manual, the term research and development encompasses three types of activities:

Basic research

Basic research involves experimental or theoretical research simply for the purpose of gaining new knowledge. There’s no specific application or use in mind.

Applied research

Applied research is undertaken where there is a clear practical goal or objective in mind.

Experimental development

Experimental development is where research knowledge and practical experience are used to develop (or substantially improve) a specific product, service or process.

What costs can be included in a Research Tax Credits claim?

The scope of claimable costs is deliberately very broad and includes:

Staff costs

These are costs relating to any members of staff directly involved in the R&D work. Such staff members could be research technicians, lab assistants or engineers for example. In cases where these expenses relate to person who holds a doctorate or an equivalent diploma, they will be counted for double their amount during the first 24 months after they’ve been hired, subject to certain conditions.

Operating expenses

Operating expenses are set at 75% of depreciation expenses and 43% of personnel expenses (or 200% for newly hired doctorate holders).

Research expenditure subcontracted to public research organisations

These costs must have occurred as the result of real, clearly defined R&D studies. It used to be the case that expenses subcontracted to public research organisations or to Industrial Technical Centers (CTI) could be doubled. However, this ended on the 1^st January 2022 and no longer applies.

Research expenditure subcontracted to private research organisations

This is research expenditure subcontracted to private research organisations that have been approved by the ministry in charge of research, or to approved technical/scientific experts. Again, the costs must relate to the creation of real, clearly defined R&D studies.

Amortisation

Amortisation costs relating to an R&D project can also be included. This includes the amortisation of fixed assets, created or acquired in new condition, and used for technical or scientific research purposes.

Creating, maintaining and defending patents

This includes registering scientific congresses, purchasing scientific articles, subscriptions to technical journals and scientific databases. The amount that can be included in your claim is capped at €60,000.

Don’t forget:

• Standardisation costs
• Reimbursable research grants and advances that must be deducted from the eligible expenditure base.

Fees payable to Myriad Associates are calculated as a percentage of your Research Tax Credit award and must be deducted from the expenditure base.

How can my company claim the Research Tax Credit?

CIR claims are made by completing Declaration 2069-A-SD, available on the impots.gouv.fr website under the heading "Search for forms".

Companies must be persuasive in their claim, fully justifying why they believe their project is eligible. Maximising your claim is also a challenge, and under or over-claiming is a common occurrence. In the past, the Myriad team have been able to far exceed the claim amount a client was expecting by going it alone, simply through our extensive knowledge and expertise.

I want to apply for the Research Tax Credit. But will the tax authorities trigger a general accounting audit if I do?

The Ministry of Higher Education, Research and Innovation will often examine R&D tax claims with a view to verifying CIR claim eligibility. A number of things can trigger such an investigation, such as an unusually high claim amount or inaccurate record-keeping.

Accounting audits can be time-consuming and stressful - they're well worth avoiding. This is why many companies in France use the services of an R&D tax consultancy, to make sure their claim is watertight right from the start. Plus, if any issues do arise, a good consultancy like Myriad Associates will work on your behalf to find an amicable solution.

Is your company ready to claim the Research Tax Credit?

Various versions of R&D tax relief are available not just in France, but across the UK, Ireland and many other European countries as well.

If your business is located in France, why not found out how much your company could claim by reading through our Crédit d'impôt Recherche (CIR) page (you may need to use Google Translate). You can also call us on 01 89 20 27 90 or send us a message.

Company based in the UK or Ireland?

You too could claim thousands back in R&D tax relief. See our R&D Tax Credits UK or R&D Tax Credits Ireland pages to find out how.