Background information

The research tax credit (RTC) aims to improve innovation and competitiveness of companies. Thanks to this tax credit, companies can incur research and development expenses and be partially reimbursed for these expenses. Far from being limited to large companies, the RTC is available to all industrial, commercial and agricultural companies, whatever their legal form and size, provided that they are taxed according to their actual regime and that they carry out research and/or development expenditure.

Content of measure

The R&D activities which can benefit from the regime are defined as:

• fundamental research,
• applied research, and
• development research.

The main categories of expenses which can give right to the tax credit are:

• depreciation of assets dedicated to R&D projects (including patents acquired);
• costs of employees with the appropriate technical skills (including social charges) dedicated to R&D projects;
• operating expenses dedicated to R&D assessed at 75% of the former amount;
• subcontracted research activities (even within the EU);
• certain types of expenses related to compliance with regulatory standards.

This research tax credit covers 30% of all R&D costs up to €100 million, and 5% above this threshold. As of 2013, innovation expenses incurred by SMEs are also eligible for the research tax credit (up to €80,000 of tax credit a year).

France’s research tax credit is also a powerful incentive for research partnerships, as all expenditure contracted out to public sector bodies is double-counted, thereby effectively doubling the research tax credit. Salaries paid to junior final-year doctoral and post-doctoral research personnel on their first permanent contract are quadruple-counted when calculating the research tax credit for two years.

The research tax credit and 'innovative new company' (JEI) schemes have been fixed for five years to provide businesses with visibility and legal security.

Use of measure

In 2018, the latest year for which estimated data is available, 28,800 companies declared expenditure under the CIR, i.e. almost 3 times their number in 2007 (9,886 declarants, one year before the 2008 reform) and almost 5 times their number in 2003 (5,833). The scheme generated a tax receivable of €7.25 billion in 2021.

According to the evaluation carried out by the National Commission for the Evaluation of Innovation Policies (CNEPI), in the report published in June 2021, the CIR:

• has positive but moderate effects on R&D and innovation activities, and no significant impact on value added and on investment, except for intangible investment.
• has positive effects on SMEs, but no significant effect has been established with regard to TSEs and large companies.
• has a modest effect on the attractiveness of France as a location for of R&D by multinational companies.
• leads to a reduction of 5 to 15 percentage points in the implicit corporate tax rate.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Applies to all businesses	Does not apply to citizens

Actors and funding

Actors	Funding
National government	National funds

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	No involvement	No involvement
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• No involvement
• Main level of involvement: Unknown

Involvement

None.

Views and reactions

Unknown

Sources

• 01 July 2014: Développement et impact du crédit d'impôt recherche : 1983-2011, Ministère de l’Education nationale / Ministry of National Education, April 2014 (www.vie-publique.fr)
• 01 June 2016: KPMG (2016), Competitive Alternatives (mmkconsulting.com)
• 15 April 2017: Salies, E. (2017), Etudes d'impact du crédit d'impôt recherche (CIR) -une revue de la littérature, OFCE (www.enseignementsup-recherche.gouv.fr)
• 01 April 2018: Eurofound (2018), Employment effects of public innovation support measures, Publications Office of the European Union, Luxembourg (www.eurofound.europa.eu)
• 05 April 2018: Cadic O. (2018), rapport d'information relatif à l'accompagnement du cycle de vie des entreprises, Sénat (www.senat.fr)
• 01 November 2019: ANRT Association Nationale de la Recherche et de la Technologie (2018), (www.anrt.asso.fr)
• 01 February 2021: L. Perrain (2019), le crédit d'impôt recherche en 2017, MESRI-DGRI (www.enseignementsup-recherche.gouv.fr)
• 01 June 2021: Évaluation du crédit d’impôt recherche - Avis de la CNEPI 2021 (www.strategie.gouv.fr)
• 21 April 2022: Tout savoir sur le crédit impôt recherche (CIR) (www.economie.gouv.fr)
• 01 August 2023: Ministère de l’Enseignement supérieur et de la Recherche (2014), (www.enseignementsup-recherche.gouv.fr)
• 17 April 2024: Bunel, S., Sicsic; M.; Les incitations fiscales à la recherche et développement et à l’innovation : état des lieux, effets et alternatives (sciencespo.hal.science)
• 30 August 2024: Ministère de l’Enseignement supérieur et de la Recherche (2014), Guide (www.enseignementsup-recherche.gouv.fr)