France offers a generous research and development tax credit scheme. If you are a UK business that is subcontracting R&D work to France, or performing R&D in France then read on. For more information on the UK R&D Tax credit scheme click here. If you are a non-French company that requires a CIR certificate to give to your French clients then this is a service we provide for our clients who use us for assistance with their UK R&D tax relief claim.
Why a research tax credit (CIR)?
Tax incentives have become one of the major instruments of public policy for research and innovation. Many countries have adopted them as general instruments, which may improve the national environment for research and development (R & D) without targeting sectoral or technological, as opposed to direct aid such as targeted subsidies. A classic problem , this incentive to increase research capacity and national innovation to strengthen the competitiveness of enterprises, is now one of the attractive areas for R&D activities.
Who can benefit?
All industrial, commercial, agricultural, as well as associations that are governed by the laws of 1901 (under certain conditions).
Which expenses qualify for the Tax Credit?
Essentially expenditure on human and material resources allocated to R & D within the company, subcontracted research and technology, watching, taking and defending patents.
How do companies claim the credit?
Companies have the option to use the procedure, known as a Tax Ruling, which allows them to obtain a Notice of Tax Administration from MESR on the eligibility of their R & D work before the start of projects. The response time of the Administration is 3 months. If no answer is obtained, a favorable opinion is deemed obtained and enforceable during a subsequent check.
How is the tax credit recovered?
The ITC is reclaimed against corporate tax, otherwise it is repaid at the end of the third year. However, it is immediately returned:
• to new firms (the year of formation and four years);
• to start-ups and SME growth companies (gazelles).
• Companies that can neither be charged, nor the reimbursement have the opportunity to mobilize debt
• state firms that represents the CIR with a financial institution (BNP Paribas, Oséo, Société Générale).
2008 Changes to the R&D Scheme
As per the announcement of 2008, CIR has been simplified and the budget for it increased from 1.4 billion euros during 2006 to about 3 billion in 2008.
◊Elimination of the 16 million euro research tax credit ceiling. A new higher ceiling has been introduced: expenditures exceeding 100 million euros are eligible for a research tax credit at a reduced rate of 5% instead of 30%.
◊ Effective January 1st, 2008, the research tax credit is calculated on a volume basis of the amountof R&D expenditure, and is no longer based on incremental increases in the level of expenditure. It thus becomes much easier to calculate and the company can quickly assess the amount of its tax credit to come.
◊ Research tax credit rates on the volume aspect have been increased to 30% from the original 10% up to a limit of 100 million euros.
◊ For companies seeking to qualify for the first time, or for those that have not received the tax credit within past five years there is a special introductory tax credit rate of 50% for the first year and 40% for the second year.
◊ The waiting period for advance approval (rescrit fiscal) by the ministry was reduced from six to three months effective March 1st, 2008.
◊ Effective January 1st, 2008, companies receiving research tax credit can request that the tax authorities officially confirm the eligibility of their R&D expenditures. In the event of any errors, omissions or anomalies, companies will be requested to rectify their situation, but will not incur any penalties.
For full information on how the CIR works click here
For more information on how to claim the credit Contact Us