What is french R&D tax credit?
R&D Tax Credit is a fiscal measure directed towards supporting Research & Development (R&D) activities in private sector.
Industrial, artisanal, commercial & agricultural companies are eligible to R&D Tax Credit regardless of their size and legal status. They shall be submitted to corporation or income tax on their real benefits. R&D Tax Credit can also apply on certain companies exempted from tax:
- Companies located in specific supported areas (such as ZAFR, ZRR, ZRD, ZFU-TE);
- Young & Innovative companies (JEI)
- Companies created to takeover a struggling business.
R&D Tax Credit rate may vary regarding the investment amount and localization. In continental France, Tax Credit rate is 30% up to 100 M€ expense, and 5% above. In Corsica and overseas territories, Tax Credit rate is upgraded to 50% for the part under 100 M€.
Which activites are eligible to R&D tax credit?
Eligible activities are Fundamental Research, Applied Research and Experimental Development, as described in the Frascati Manual. This reference lists 5 main criteria for identifying R&D. Such activities shall be:
- Novel,
- Creative,
- Uncertain,
- Systematic,
- Transferable and/or reproductible.
In addition, eligible expense must be located inside the Economic European Area (EEA), except for technological watch and intellectual property.
Main eligible expense
- R&D and Young PhDs staffing costs,
- Depreciation charge and lease of R&D dedicated equipment,
- Operating costs, calculated as a percentage of the two above,
- Intellectual Property (Patents and Vegetal Origin Certificates)
- Sub-contracted R&D to public and agreed organisations
- Standardization costs.
How to claim R&D tax credit?
To claim R&D Tax Credit, the company must fill the 2069-A-SD cerfa form and join it to its tax return. This form must be transmitted to the corporate tax service and to the R&D & Innovation Direction of the Ministry of Higher Education and Research. This form details each expense, and can be completed with appendix if required:
- Appendix 1 for companies that engage more than 10 M€ and less than 100 M€ R&D expense,
- Appendix 2 for companies that sub-contract part of their R&D activities,
How to perceive R&D tax credit?
In the standard procedure, R&D Tax Credit is deducted directly from the corporation tax due by the company for the related Fiscal Year. The surplus, if existent, constitutes a carrying forward claim, which can be used to pay corporation tax for the following 3 years. After 3 years, if the claim is not absorbed, it becomes refundable for the company.
There are special cases, where R&D Tax Credit can be directly perceived as a refund:
- Young & Innovative Companies (JEI),
- SMEs: less than 250 employees, less than 50M€ Turnover or less than 43M€ Balance,
- Companies in insolvency proceedings,
- Newly created companies (creation year and following 4 years).
