An attractive tax environment for investing and innovating in France

The research tax credit enables companies to reduce their taxes based on expenses incurred in basic or applied research or experimental development activities.

The research tax credit applies in particular to:

• Industrial, commercial, agricultural and craft businesses that are subject to corporate tax (IS) or personal income tax (IR) under an actual profit regime (standard or simplified).
• And certain exempt businesses (“innovative new companies” (JEI), businesses located in priority zones).

The R&D work must be carried out in the European Union or in a member state of the European Economic Area (EEA) that has signed an administrative assistance agreement with France.

Eligible expenses include:

• Depreciation of assets and buildings used for R&D or prototype design.
• Salaries and benefits of researchers and technicians involved in R&D, as well as certain expenses related to salaried inventors.
• Patent filing, defense and commercialization costs.
• Research expenses contracted to accredited organizations.
• Operating expenses calculated on a flat-rate basis.
• Certain specific expenses in the textile, clothing and leather sector (until December 31, 2027).

The rate is 30% of eligible R&D expenditure (50% in overseas territories), up to €100 million, and 5% above that amount.

Public subsidies must be deducted from the calculation base.

The research tax credit is calculated on a calendar year basis, regardless of the fiscal year-end date.

The tax credit is applied against the tax due (corporate tax or personal income tax) for the year in which the expenses are incurred and for the following three years. If it cannot be fully used, the remaining balance is refunded.

The refund application is submitted online, via the company’s professional account. The company must provide information and documents that vary depending on the amount of expenses eligible for the research tax credit and the business’s tax status.

The innovation tax credit is for SMEs with fewer than 250 employees, whose revenues are less than €50 million or whose balance sheet total is less than €43 million, and which are subject to standard tax regulations.

The innovation tax credit finances expenses related to the design of prototypes or pilot installations of new products featuring significant technical, functional, ergonomic or eco-design improvements.

The prototype must not be intended for sale but instead serve as a model for manufacturing the new product.

Up to a limit of €400,000 per year, the following are eligible:

• Depreciation of assets and buildings used for the design.
• Depreciation of patents and plant certificates.
• Salaries and benefits of personnel assigned to the project.
• Patent, design and model fees.
• Expenses for approved subcontracting.

Expenses already claimed for the research tax credit cannot be claimed for the innovation tax credit. Costs relating to prototype production are not eligible.

20% of eligible expenses in mainland France and up to 60% in overseas territories, up to a limit of €400,000 per year. Businesses can secure their application through a ruling or innovation tax credit approval, guaranteeing the project’s compliance with legal criteria.

The scheme has been extended until December 31, 2027.

Public subsidies received for research projects must be deducted from the expenses used to calculate the innovation tax credit.

The innovation tax credit is calculated on a calendar year basis, regardless of the fiscal year-end date.

The innovation tax credit must be declared, applied for, and, if applicable, refunded using procedures similar to those relating to the research tax credit.

To benefit from the innovation tax credit, the business must:

• Declare its eligible expenses on the same form as the research tax credit.
• Attach this form to its income tax return.

The filing deadline depends on the business’s tax status.

In practice

A firm subject to corporate tax (IS) must file its claim no later than the 15th day of the fourth month following the end of the fiscal year. The refund request is then made via the professional account on the tax authority’s website.

The research tax credit is applied to the tax due for the year in which the expenses were incurred and is deducted when paying the remaining tax balance for that year.

If the tax credit is not fully used, the business can apply it to its taxes due in the following three years.

After this three-year period, any unused balance is refunded directly to the business.

Specific rules may apply, particularly for businesses created as part of a merger, restructuring, expansion, or takeover of existing activities, and for those created less than two years ago or that qualify as “innovative new companies” (JEI).

The scheme is for industrial and commercial businesses located in France that invest in four key sectors of the energy transition:

• Batteries.
• Wind power.
• Solar panels.
• Heat pumps.

For businesses’ expenses to be eligible for the green industry tax credit, they must relate to:

• The production of battery cells and modules, and the production of the main equipment for wind power, solar panels and heat pumps.
• The production of essential components designed and used primarily for the manufacture of this equipment.
• The production or processing of the necessary critical raw materials for the manufacture of the equipment and components outlined above.

Investment expenditure must be incurred following the application for approval to be eligible.

The green industry tax credit rate is 20% of investments made and may be increased depending on the location and size of the business. The tax credit is capped at €150 million per project. This cap may be raised to €200 million per project, or even €350 million per project, in certain regional aid zones.

The Video Game Tax Credit (CIJV), administered by the French National Centre for Cinema and the Moving Image (CNC), supports video game production in France.

It amounts to:

• 30% of eligible expenses
• up to a limit of €6 million per fiscal year.

Eligible expenses cover various types of investment, including equipment, team remuneration, operating costs, and related production expenses.

Projects must also meet cultural criteria, including originality, diversity, and the absence of pornographic or violent content. Exceptions may apply for works intended for adult audiences, subject to specific regulatory conditions.

For more information:

• French tax authority website
• CNC website

The film tax credit finances the production of feature films made in France.

It is equal to 30% of eligible expenses, which cannot represent more than 80% of the production budget. The amount is capped at €30 million.

Eligible expenses include those related to crew salaries, filming (or production for an animated film), transportation, accommodation and post-production.

For more information:

• CNC website