Research Tax Credit (CIR): Highly Favorable Tax Treatment
- Category: Regulations
- Last Update: Fall 2023
France is at the forefront in terms of the tax treatment of R&D (OECD, 2015), far ahead of China (30th), Japan (31st), and the United States (40th). Indeed, although France has a high labor cost and high taxes, the country offers many advantages (exemptions and tax credits) to innovative companies and/or those engaged in R&D activities in France.
Established in 1983, the Research Tax Credit (CIR) is the main incentive for companies to conduct their R&D in France with the aim of improving competitiveness, increasing France's attractiveness, and encouraging job creation. The Finance Law of 2008 simplified the system and increased the ceiling (from 16 to 100 million euros). It applies to all companies and all sectors of activity.
In 2021, nearly 28,800 companies declared eligible expenses for CIR amounting to 25.6 billion euros. CIR for R&D represents 94.6% of declared expenses, while the Innovation Tax Credit (CII) and the Collection Tax Credit (CIC) represent only 5.4% of declared expenses.
Since 2015, the fundamentals of regulations have remained unchanged, but several new areas are now included in the research tax credit program, such as archaeology, architecture, etc. Our experts can help determine your eligibility.
In 2020 and 2021, the definition of R&D increasingly incorporates concepts proposed in the Frascati Manual of 2015.
Moreover, the issue of outsourcing R&D has benefited from several decisions of the Council of State and now includes a broader range of eligible expenses. This particularly addresses SMEs that subcontract part of their R&D and were penalized by the previous system.
Regarding the immediate reimbursement of tax credits, the doctrine of July 2021 and decisions of December 2020 broaden the definition of eligible SMEs.
In short, the Research Tax Credit is a fiscal measure that allows for very tangible gains:
- An average financing of 43% of R&D payroll expenses;
- Financing of 75% for immobilized R&D investments;
- 200% financing for 2 years for the recruitment of a young doctor dedicated to R&D;
- Additional financing for PhD students.