Temporary additional depreciation mechanism to be extended until April 14th, 2017: opportunities for certain R&D and IT investments

The French parliament is currently reviewing a bill for the “digital Republic” that is in the process of extending the temporary additional depreciation mechanism applicable to certain assets for another year – this will allow more assets to benefit from the enhanced deduction.

Originally enacted as part of the Growth and Economic Activity Law in July 2015, the mechanism allows corporate income taxpayers to deduct an additional amount equal to 40% of the original cost (excluding financing expenses) of eligible assets used for the company’s business and that were acquired or manufactured by the company during the period between 15 April 2015 and 14 April 2016. The extra deduction is spread (on a straight-line basis) over the normal useful life of the assets. For assets to be eligible for the deduction, they must be depreciable under the declining-balance method (according to the French tax code) and must fall within one of the following categories (the last three of which were added by the amended finance law for 2015 and the finance law for 2016):

  • Equipment and tools used for industrial manufacturing or processing operations
  • Facilities used for water purification and air quality improvement
  • Handling equipment
  • Equipment used for the production of steam, heat or energy (except for facilities for the production of electrical energy subject to regulated tariffs)
  • Materials and tools used for scientific or technical research activity
  • Optic fiber installations and equipment
  • Natural gas or bio-methane functioning heavy trucks
  • Ski lift installations

According to the French tax authorities, the bill would provide for a one-year extension of the 40% additional depreciation mechanism, so that it would apply to assets acquired or manufactured until 14 April 2017 (and until 31 December 2017 for natural gas or bio-methane functioning heavy trucks).

In addition, certain computer equipment to be used for a computer “rack” would qualify for the enhanced deduction as well as machines for intensive computing (“ supercomputers “), and the bill would extend the benefit to co-investments in optic fiber installations and allow the owner and the holder of the right to use such equipment to split the deduction.

Thomas Perrin

Thomas Perrin, Partner, specializes in international tax. He has been involved in many transactions for international French and foreign groups. In 2004, he created the R&D department as well as […]

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 […]

Lionel Draghi

Lionel Draghi, Partner and Engineer, is a member of R&D department. Lionel has more than 15 years’ experience as Software Developer and Product Architect in the Industry sector. He has […]

Rémi Barnéoud

Rémi has over 20 years of experience in development, project management and strategic advice in the areas of software, electronics, mechanics, and control and monitoring systems. Remi has developed an […]

Pierre Hardoin

Software and industrial engineer, working on R&D incentives such as tax credit for software or industrial R&D clients.