Innovation tax credit (CII) : how to benefit from it?

Innovation tax credit in France –  Overview

The innovation tax credit in France (in French “Crédit d’Impôt Innovation” (C.I.I.)) is a tax measure that enables a partial funding of outlays incurred to enhance the functionnalities of any device on a given market; it can be in the form of a reimbursement or a reduction of corporate tax.

International French group branch offices or subsidiary companies, provided thay are SME under the European definition, can obtain from the French state the reimbursement of up to 20% of their spending to embed new functionnalities on devices, in the same conditions as French companies.  Branch offices are also concerned, that is to say, unincorporated foreign stable establishments in France.

Because the innovation tax credit in France is a tax measure, it is not subjected to any regulatory framework and is not taken into account for the limit of European public fund aids.

How does it work?

Scope of spending…

The spending engaged has to relate to the set up or conception of new prototypes or design of new products. Hence, a new product should meet a couple of criteria. First, it must not be made available to customers. Second, It outperforms technically those existing on the market.

…and calculation of innovation tax credit in France

The spending eligible for CII are the following:

  • Salaries and related social expenses,
  • Depreciation allowances for assets used in innovation projects,
  • Operational expenses,
  • Intellectual protection expenses (patents costs),
  • The costs of subcontracted research entrusted to public research entities, to scientific experts and private structures approved by the Ministry of Industry.

The expenses are not capped!

You must substrate all subsidies received from the expenses engaged.

The research tax credit and staff expenses

  • Gross salaries and the employers’ social tax costs for researchers (executives and technicians), up to double the amount for young PhD possessors under specific conditions,
  • Gross salaries and employers’ social tax costs for managing directors (in French “mandataires sociaux”),
  • Salaries of trainees,
  • All staff costs not belonging to the company, provided they are charged at cost price, (prorated to the time spent on Innovation programs only).

The research tax credit and depreciation allowance

  • The depreciation allowance assigned to all Innovation programs are included in the base of calculation.

… And running costs

  • Staff expenses as defined above benefits from an increase to a rate of 50%,
  • Depreciation allowance benefits from an increase of 75% within operating costs.

… And subcontracted research

  • The innovation expenses entrusted to private organisms, which are listed and hence authorized by the Ministry of Indutsry’s Website.

The subsidies related to the program must be susbtracted for the above mentionnned expenses.

The maximium innovation tax credit you can get..

All the expenses are capped to 400 K€. Hence the Innovation Tax Credit cannot ovetake 80 K€

..and its repayment

The tax credit will reduce corporate tax owed by the company. Any excess is refunded immediately.

How to legally optimize and secure the Innovation tax credit (CII)?

Companies that want to secure their CII in France can file a prior notice request (rescrit fiscal in French) to the tax authorities before starting research operations. This procedure is highly recommended. The opinion will constitute a position on the part of the tax authorities standpoint, although it keeps its right to control the reality and the amounts of the expenses eligible.

The company has to submit evidence attesting the reality of their innovative programs. This submission takes the form of a write-up laid out according to the requirements of the Ministry of Industry.

The research tax credit and other taxes incentives

The status can be accumulated with all other tax incentives, especially the CICE, the CIR, the Video-Game tax credit and the Young Innovative Statut (JEI). For further information on this, please look up  tax credits – what you need to know. 

The innovation tax credit in France : to sum up..

Innovation tax credit

Tax incentives in France