Update – 08.02.2022
The draft finance law for 2022 presented on 22 September 2021 in the Council of Ministers and which initially did not include any specific measures in the field of innovation taxation was the subject of amendments adopted at first reading on 16 November 2021 (and retained in the definitive version of Finance law for 2022).
Extension of the duration of the status of Young Innovative Enterprises (JEI)
The “young innovative companies” (JEI) scheme set up in 2004 (CGI, art. 44 sexies 0-A and art 44 sexies A), supports small and medium-sized enterprises with high potential for innovation and growth.
To benefit from tax advantages and social exemptions under this scheme, the company must have been created less than eight years ago and make R&D expenses of at least 15% of its tax-deductible expenses.
To take account of the long duration that may be necessary to achieve initial results in certain areas of research, the PLF provides for an extension of the duration of JEI status from seven to ten years, i.e. until the eleventh anniversary of the JEI.
Introduction of a Collaborative Research Tax Credit (CICO)
In the context of the end of the doubling of R&D outsourced to public bodies as part of the CIR base from 1st January 2022 voted a year ago, the parliament adopted a compensatory measure valued at € 140 million by introducing a new tax credit for the benefit of companies that conclude, from 1st January 2022 until 31 December 2025, collaboration contracts with certain Research Organizations and which finance, in this context, the research expenses incurred by these organizations.
The amount of the tax credit would be equal to 40% of the expenses invoiced by the Research Organizations, within the limit of 6 million euros per year. The rate of the tax credit is increased to 50% for companies that will meet the Community definition of SMEs.
This tax credit applies to collaboration agreements that differ from simple subcontracting in that it is aimed at the joint conduct of research projects by a company and one or more research organizations. They are based on a sharing of risks and related results.
The amendment provides for a number of conditions to be met in order to benefit from the tax credit:
- Research organisations must meet the definition given by the European Commission.Communication No 2014/C 198/01) and be approved by the Ministry of Higher Education, Research and Innovation (MESRI).
- The Organizations must not be linked with the company receiving the CIR.
- The collaboration contract must be concluded prior to the initiation of collaborative R&D work.
- The contract must provide for the invoicing of research expenses by the Research Organizations at their production cost.
- The contract must set out the common objective, the distribution of research work, and the modalities for sharing risks and results.
- The expenses invoiced by the Organization may not exceed 90% of the total expenses incurred for the realization of the operations provided for in the contract.
- Research Organisations must be able to publish the results of their own research carried out under the contract.
It is specified that the sums concerned cannot be taken into account for the benefit of the CIR. However, they will be used for the assessment of the threshold of EUR 100 million in research expenditure above which the CIR is calculated at the rate of 5%.
Finally, the conditions of use and reimbursement will be modelled on those of the CIR, namely deduction from the corporate tax of the year and the following 3, then reimbursement in the absence of use at the end of a period of three years, except for SMEs benefiting from an immediate refund. In addition, the scope of the Comité Consultatif CIR will be extended to disputes relating to this mechanism.
Modifications of the innovation tax credit (CII)
An innovation tax credit (CII) at the rate of 20% is provided for small and medium-sized enterprises (SMEs) industrial and commercial or agricultural that make certain innovation expenses (prototypes in particular), taken into account within the limit of 400 k€.
This credit is currently limited to 31 December 2022, when it could be repealed. In order to continue supporting the innovation expenditure of SMEs, an amendment adopted by the National Assembly provided for the extension of the credit system until 31 December 2024.
In addition, as from 1 January 2023, (i) the G&A expenses within the CII base would be abolished, and (ii) in return, the CII rate would be increased: the common law rate would be increased from 20% to 30% and the overseas territory rate from 40% to 60%.