The Finance Act for 2022 introduced a new tax incentive to promote innovation: the Collaborative Research Tax credit (CICo), codified in the article 244 quarter B bis of the CGI. The decree n° 2022-1006, which defines the conditions of application of the CICo was finally published on July 15, 2022. This publication gives us the opportunity to review this scheme with a synthesis of this new tax credit and to details – in green below –the clarifications provided by the decree.
The CICo regime
The CICo benefits to industrial, commercial or agricultural companies that conclude research collaboration contracts with certified Research and Knowledge Dissemination Organizations (ORDCs), and which finance, in this context, certain research expenses incurred by these organizations.
The scientific or technical research operations eligible to CICo are the same as the one eligible to Research Tax Credit (CIR), i.e. fundamental research, applied research and experimental development (Annex III of the CGI, 49 septies V).
This new arrangement applies to expenditure invoiced under collaboration contracts concluded between January 1st 2022 and December 31, 2025.
It covers collaboration agreements which differ from mere subcontracting since they deal with joint conduct of research projects by a company and one or more ORDC. They are based on risk sharing and results sharing.
The amount of the tax credit is equal to 40% of the expenses invoiced by these certified ORDCs, within the global limit of 6 million euros per year. The rate of the tax credit is increased to 50% for SMEs.
Conditions to benefit from the CICo
To benefit from the CICo, several conditions must be met, including:
Certification
The ORDC – as defined by the European Commission (Communication n°2014/C 198/01) – must be certified by the Ministry of Research (MESRI).
New Article 49 septies VA of the Annex III to the French Tax Code (CGI) enacts that:
Formalism
The certification application of the ORDC must follow the model (French/English) fixed by the Administration and submitted online.
Must be included in the application:
- evidence that the organisation meets the definition of ORDC given by the European Commission (Communication No 2014/C198/01). In practice, certificate issued by the ANR (Agence Nationale de la Recherche) or form conforming to a model established by the Administration including information related to the nature of the organisation’s activities;
- the French CIR certification. In other words, the CICo certification of the ORDC is subject to prior CIR certification.
Duration
CICo approval is granted for 3 years, or for the period until the end of the French CIR certification if it is lower.
The CICo certification may be withdrawn by the MESRI if the organisation no longer fulfils the ORDC qualification criteria.
Deadline for application submission
- March 31 in case of a first application. By exception, September 30, 2022 for a first application in 2022
- End of the last year certified in case of a renewal
Arm’s length relationship
The ORDC must be at arm’s length with the CICo beneficiary company.
Contractual framework
- Contract must be concluded prior to the launch of collaborative R&D works.
- Contract must provide the invoicing of R&D expenses by the ORDCs at cost.
- Contract must set out the common objective, the split of the research works, and the risk and results sharing conditions.
- Expenses invoiced by the ORDC may not exceed 90% of the total expenses incurred for the realization of the operations provided for in the contract
In practice, the threshold of 10 % of minimum expenditure incurred by the ORDCs is calculated by the ratio between the research expenditure actually incurred by the ORDC(s) and the total research expenditure incurred by all the parties for carrying out the research operations provided for in the collaboration contract. (Annex III to the CGI, art. 49 Septies VB). - The ORDC must be able to publish the results of its own research conducted under the contract
Computation and filing
Use and reimbursement conditions are similar to those of the CIR, i.e. a deduction from corporate income tax related to the year and the following three years, and refund if not used after a period of three years, except for SMEs benefiting from an immediate refund.
Whatever the closing date of the financial years and whatever their duration, the CICo is calculated by reference to the expenses invoiced during the calendar year. In the event of a financial year-end during the year, the amount of the CICo shall be calculated taking into account the eligible expenditure invoiced for the last calendar year. (Annex III to the CGI, art. 49 Septies VC).
It is set off against the tax due after non-discharge levies and other tax credits. (Annex III to the CGI, art. 49 septies VD).
The CICo return will be made on a specific form, at the time (same as the CIR) of the filing of the balance statement for companies subject to corporate income tax, or the declaration of profit for others (Annex III to the CGI, art. 49 septies VE).
Audit
Tax audit regarding CICo is the same as for the CIR – including the potential intervention of the MESRI experts (LPF, art. R.45 B-1 and Annex III to the CGI, art. 49 septies VF).
Finally, the Comité Consultatif CIR competence is extended to disputes related to the CICo (the decree n° 2022-1005 of 15 July 2022 amends several provisions of the LPF to this effect).
Publication of administrative guidelines (BOFiP) on this new tax credit are expected, that should give additional and practical details, for example on the CIR/CICo articulation, on the potential benefit of the CICo to SOWs signed after January 1st, 2022 and related to master agreements concluded prior to that date, or on the practical computation of the CICo – notably as regards the deduction of subsidies.