Everything You Need to Know About the French Research Tax Credit (CIR)
What is the Research Tax Credit (CIR)?
The Research Tax Credit (CIR) is a significant tax incentive implemented by the French government to encourage companies of all sizes, from startups and SMEs to large corporations, to invest in Research and Development (R&D) activities conducted within France or the European Economic Area. This tax relief measure aims to boost competitiveness and innovation across various industries.
Introduced initially to support fundamental research, applied research, and experimental development, the CIR has evolved to become a cornerstone of French innovation policy. It provides companies with a substantial reduction in their corporate income tax, calculated based on their eligible R&D expenditures.
Key Benefits of the Research Tax Credit (CIR)
Claiming the CIR offers numerous advantages for businesses engaged in R&D:
- Significant Tax Reduction: The CIR can lead to a considerable decrease in a company’s tax liability, freeing up capital for further investment in innovation.
- Cash Flow Improvement: For companies that are loss-making or have insufficient tax liability to absorb the full credit, the CIR is refundable, providing a direct cash injection.
- Enhanced Competitiveness: By reducing the cost of R&D, the CIR helps French companies compete more effectively on the global stage.
- Stimulates Innovation: The incentive encourages companies to undertake ambitious R&D projects they might otherwise not pursue.
- Supports Job Creation: Increased R&D activity often leads to the creation of high-skilled jobs in research and related fields.
CIR Rates and Eligible Expenditures
The CIR rate varies depending on the amount of eligible R&D expenditure:
- 30% for the portion of eligible R&D expenses up to €100 million.
- 5% for the portion of eligible R&D expenses exceeding €100 million.
For companies claiming the CIR for the first time, or those that haven’t claimed it in the previous five years, the rate is increased to 50% for the first year and 40% for the second year (within the €100 million threshold).
Eligible expenditures encompass a wide range of costs directly related to R&D activities:
- Personnel Costs: Salaries and social security contributions for researchers and R&D technicians.
- Operating Costs: Calculated as a fixed percentage of personnel costs (43% for personnel expenses, 75% for personnel costs related to researchers and technicians directly assigned to R&D operations) or based on actual costs if justified.
- Depreciation of Assets: Depreciation charges for fixed assets (equipment and buildings) used for R&D purposes.
- Subcontracted R&D: Costs related to R&D activities outsourced to accredited public or private research organizations (requiring CIR Accreditation for the subcontractor).
- Patent Costs: Expenses related to filing and maintaining patents resulting from R&D projects.
- Technological Watch: Costs associated with monitoring technological advancements relevant to the company’s R&D activities.
- Standardization Costs: Expenses related to participating in official standardization meetings.
Eligible R&D Activities
To qualify for the CIR, activities must fall into one of three categories:
- Fundamental Research: Experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view.
- Applied Research: Original investigation undertaken to acquire new knowledge, directed primarily towards a specific practical aim or objective.
- Experimental Development: Systematic work, drawing on existing knowledge gained from research and/or practical experience, which is directed towards producing new materials, products or devices, installing new processes, systems and services, or improving substantially those already produced or installed. This must involve overcoming scientific and/or technological uncertainties.
Eligible Business Sectors
The CIR is applicable across all business sectors, provided the company conducts eligible R&D activities. This includes, but is not limited to:
- Information Technology (Software Development, AI, Big Data)
- Manufacturing (Automotive, Aerospace, Materials Science)
- Pharmaceuticals and Biotechnology
- Energy (Renewables, Efficiency)
- Agri-food
- Chemicals
- Engineering Services
How to Claim the Research Tax Credit (CIR)?
Obtenir le Crédit d’Impôt Recherche (CIR) requiert une préparation minutieuse pour garantir que toutes les conditions d’éligibilité soient bien remplies et que la demande soit correctement documentée. Voici les étapes essentielles pour obtenir le CIR :
Claiming the CIR involves a structured process:
- Identify Eligible Projects and Expenses: Meticulously track all R&D activities and associated costs throughout the fiscal year.
- Calculate the Credit: Apply the relevant rates (30% or 5%) to the total eligible R&D expenditures.
- File the Declaration: Declare the calculated CIR amount using the specific tax form (Cerfa n° 2069-A-SD) alongside the annual corporate income tax return.
- Prepare Supporting Documentation: Compile a detailed technical justification file for each R&D project claimed. This file should describe the project’s objectives, the scientific or technological challenges addressed, the work carried out, the resources allocated, and the results obtained. This documentation is crucial in case of an audit by the tax authorities or the Ministry of Research.
- Optional Tax Ruling (Rescrit Fiscal): Companies can request a formal ruling from the tax administration to confirm the eligibility of their R&D projects before filing their claim, providing legal certainty.
How AREAD Supports Your CIR Claim
Navigating the complexities of the CIR can be challenging. AREAD offers specialized expertise to guide you through every step, maximizing your chances of successfully obtaining the Research Tax Credit:
Project Eligibility Assessment:
We conduct a thorough audit to identify projects that meet the specific R&D criteria required for the CIR.
Calculation of Eligible Expenses:
AREAD assists you in meticulously inventorying personnel costs, subcontracting fees, depreciation, and other expenses to maximize your tax credit.
Technical Justification File Preparation:
Our experts handle the complete drafting and structuring of the technical justification file, ensuring compliance with the administration's expectations, which is critical in case of a tax audit or refund request.
Tax Declaration Assistance:
We support you in accurately completing and submitting the CIR tax declaration (Cerfa 2069-A-SD).
Administrative Follow-up:
After your claim is submitted, AREAD provides proactive follow-up with the tax authorities to answer any questions or requests for additional information, allowing you to focus on your projects without worrying about administrative aspects.
With AREAD’s support, you benefit from specialized expertise guiding you at each stage, helping you optimize your chances of success in obtaining the CIR.
