Innovation Tax Credit (ITC)
Verified 01 January 2024 - Legal and Administrative Information Directorate (Prime Minister)
The Innovation Tax Credit (ITC) is an extension of the Research Tax Credit (RTC) that applies to expenditures made until 31 december 2024 by SMB: titleContent. The expenditure concerned is linked to the carrying out of operations to design prototypes or pilot installations of a new product.
One SMB industrial, commercial or agricultural can benefit from the innovation tax credit if it completes one of the conditions following:
- Either she's subject to an actual regime (regular or simplified) business tax (IS) or income tax (IR).
- Either she tax-exempt and is one of the following:
- Young Innovative company (JEI)
- Company created for the recovery of a company in difficulty
- Company located in one of the following areas:
- Regional aid area (RDA)
- Free-urban zone / entrepreneurial territory (ZFU_TE)
- Employment pool to be revitalized (BER)
- Defense Restructuring Area (DRA)
- Free zone of activity of the overseas departments
- Rural Revitalization Area (RRZ)
- Urban basin to be dynamized (BUD)
- Priority Development Area (PDA)
The CII applies to implementation projects of design operations of a prototype or pilot installation a new product.
The product must meet the following 2 conditions:
- It must not not yet made available on the market.
- He must distinguish themselves from existing products superior technical, eco-design, ergonomic or functional performance.
Warning
The prototype shall not be intended to be placed on the market. It should be used as model for the realization of a new product.
The expenses eligible for the ITC are as follows:
- Depreciation of property or buildings which have been new created or acquired. They must be used in carrying out scientific and technical research. They can also be used in the performance of operations for designing prototypes or pilot installations.
- In the event of loss or damage to property or a building, the difference between insurance compensation and the cost of reconstruction and replacement
- Expenses concerning staff next:
- Researchers and research technicians who are directly and exclusively assigned to research and development operations
- As a staff member with a PhD or a diploma of an equivalent level, the expenses are taken into account for twice their amount during the first 2 years of the CDI. The number of staff must not have decreased in comparison with the previous year
- Employees who have invented after research operations and who have been paid additional remuneration
- Depreciation patents and plant breeders' rights
- Defense costs (fees of lawyers, legal expert, legal fees, etc.) patents, plant variety rights, design certificates in connection with research operations
- Deposit fee of designs and models
- Expenditure on research operations carried out by approved companies or engineering and design offices
These expenses may be internal or may be due to subcontracting.
FYI
The amount of expenses included in the calculation of the tax credit may not exceed €400,000.
Where such expenditure has already taken into account in the calculation of research tax credit (RTC)However, they cannot also be taken into account in the calculation of the innovation tax credit (ITC).
Warning
Expenditure relating to the prototype production phase or the pilot installation of the new product not concerned by the CII.
The tax credit rate varies depending on where the company is located.
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Metropolis
The innovation tax credit rate is 30%.
Overseas Department
The innovation tax credit rate is 60%.
Corsica
Small company
It is a small company when 2 of the 3 criteria the following shall be completed:
- Total balance less than or equal to €6 000 000
- Net amount net of turnover less than or equal to €12 000 000
- Average number of employees employed during the year 50 or less
The innovation tax credit rate is 40%.
Average company
This is an average company when 2 of the 3 criteria the following shall be completed:
- Total balance less than or equal to €20 000 000
- Net amount net of turnover less than or equal to €40 000 000
- Average number of employees employed during the year up to 250
The innovation tax credit rate is 35%.
Public grants received for research projects must be deducted from expenditure taken into account in the calculation of the ITC.
The ITC is determined by calendar year, irrespective of the end of the financial year.
Example :
A company that ends its fiscal year on September 30, 2024, the tax credit will be calculated on expenses incurred in the 2023 fiscal year (from 1er January 2023 to December 31, 2023).
To benefit from the innovation tax credit, the company must report its expenses on the same form as the CIR (Form No. 2069-A-SD) which must be attached to the declaration of results:
The filing date of the application differs depending on the tax regime of the company.
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Tax on businesses
The company subject to business tax must submit its application for the tax credit by the 15th of the 4the month following the end of its financial year.
Income tax
The company subject to income tax must send in its tax credit application not later than 15 days after 2e working day after 1er May.
The request must be made online through one of the following online services:
The company can deduct its innovation tax credit on the amount of tax (IS or IR) for which it is liable. The deduction is made at the time the company pays the balance of the tax for the year in which the expenditure was incurred.
Example :
A company spends money in 2023 to get an innovation tax credit. The amount of the tax credit will be applied to the balance of the tax owing for the year 2023 (paid in May 2024).
The company can use the amount of its tax credit to pay its taxes during the next 3 years the year in which it received a tax credit. At the end of those three years, if the company has not used all of its tax credit, the the remaining part shall be reimbursed directly to him.
Example :
One company received a tax credit in 2023 and used a portion of that tax to pay tax owing for the same year. If she has not used up the full amount of her tax credit, she will be able to use it to pay the tax for the next 3 years. At the end of these three additional years, if he still has a part of his tax credit, it will be refunded.
However, special rules on the use of the tax credit granted shall apply to the following companies:
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Company set up in the context of a merger, restructuring, extension or takeover of pre-existing activities
The company may request that the tax credit granted to it during the sa 1re year of existence and during Next 4 years be directly reimbursed to him.
It must be held at least at 50% by the following person(s):
- Natural person
- Business of capital held at 50% at least by natural persons
- venture capital business, venture capital mutual funds, professional funds
Company created less than 2 years ago
The company may request the direct refund of his tax credit. However, it must send the supporting documents which proves that the expenses were incurred at the time of the application for reimbursement.
Young Innovative company (JEI)
The company may apply for its tax credit to be refunded directly.
Company in conciliation or safeguard proceedings
The company may apply for its tax credit to be refunded directly from the date of the decision or judgment which led to the opening of proceedings.
Company in receivership or liquidation
The company may apply for its tax credit to be reimbursed directly from the date of the decision or judgment which led to the opening of proceedings.
The claim for reimbursement shall be made in one of the following ways:
- The company is subject to business tax (IS) : she must make her application at the time of her declaration of balance of tax on her business space of the website Impasse.gouv.fr ("My services" -> "Report" -> "Tax on businesses")
- The company is subject to income tax (IR)): she must submit her refund application each year when filing her income online on her business area of the website Impasse.gouv.fr
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