Finance bill for 2020 – Research Tax Credit (RTC): a proposal for decreasing operating expenses

The finance bill for 2020, presented this Friday, September 27 by the government confirms the willingness of the French state to lower the income tax and to partially finance this major drop in income tax by the revision of certain tax loopholes, including the Research Tax Credit (RTC), announced before summer (Debate on the orientation of public finances: the RTC in the Economic and Finance Ministry sights).

Although the Minister of the Economy and Finance Bruno Le Maire has announced the RTC as being “sanctuarised”, the finance bill adjustments foresee a reduction in the computation of its eligible expenditure.

This adjustment does not change the fundamental parameters of this incentive, which remains a major stake for France’s competitiveness in financing innovation.

The Government proposes a reduction in the rate applicable to expenditures costs, reduced from 50% to 43% for staff expenses. It should be noted that the 75% rate applied for the calculation of operating expenses related to the depreciation of equipment used for research operations remains unchanged at this stage.

This would represent a 230 million euros reduction of the RTC funding, (- 3.5%) at France level.

Should this reduction be voted in the end, it would be critical for companies and investors that the RTC regime becomes stable again afterwards: companies need a multiyear visibility when it comes to funding R&D.

The bill also provides that a welcome simplification: the new formal requirement to produce the form annexed to the RTC claim (2069-A-1SD), describing the nature of ongoing research work, would be deleted for companies with less than 100 million euros of eligible expenditure.

Finally, the innovation tax credit and the tax credit collection would be available until 2022 inclusive – their renewal depends on their evaluation over the period.

Currently, this bill does not provide for a change concerning the threshold of 100 million euros (threshold beyond which expenditure is financed at 5% instead of 30%). As a reminder, the reform mentioned by the budget rapporteur in the National Assembly, Joël Giraud, was to assess this threshold of 100 million euros at the level of the group and no longer at the level of the legal entity.

These measures will be discussed before the Parliament and will have to be followed with alertness before the promulgation of the finance bill in its final version, by the end of December.

Lucille Chabanel

Lucille has more than 14 years’ experience in tax law. She is a member of the corporate tax department since 2002 and joined the R&D group in 2004. She has […]

Béatrice Prim

Beatrice, a Director who has been attached to the research and development team since 2010, advises her clients on CIR (security, defence during tax audits) and coordinates missions on European […]