Funding research and innovation: understanding the CIR and CII tax credits and their benefits for your company

Are you a manager or employee of a company in the industrial, pharmaceutical or medical sector looking to develop an innovative project? But you hesitate to commit funds for fear of losing money and taking on too much risk?

To fund your research and innovation projects, tax relief schemes offer a powerful lever to maintain financial balance while continuing to invest in scientific and technological projects : the Research Tax Credit (CIR) and the Innovation Tax Credit (CII). Combinable, complementary and obtained through the same process, the line between these two funding schemes nonetheless remains hard to draw. So, CII or CIR — how do you tell them apart? Who can benefit? Which expenses are covered? Here are a few lines to help you see more clearly and figure out which tax credit fits you.

Am I eligible for the CIR (French research tax credit), a funding scheme dedicated to R&D?

There are two tax credit tools because they fund two different types of scientific and technical development. While the CII focuses on innovation expenses, the CIR concerns those tied to Research and Development.

So, what is the CIR?

The Research Tax Credit can fund all types of R&D projects; operations as defined by the Frascati Manual:

“R&D activities cover creative work undertaken on a systematic basis in order to increase the stock of knowledge, including knowledge of humankind, culture and society, and the use of this stock of knowledge to devise new applications.”

In other words, the eligibility of a Research and Development activity for the CIR rests on a scientific approach that resolves medical uncertainties or technological barriers for which no solution exists in the current state of accessible knowledge:

  • Involves an element of novelty
  • Presents an element of creativity
  • Incorporates uncertainty
  • Is systematic
  • Is transferable and/or reproducible

An R&D project is not limited to developing a new pharmaceutical process or industrial concept. To justify their “new” character, these must present an original technique, apply recent concepts, define hypotheses, identify verifiable consequences and describe the experimental protocol — all within the logic of a substantial improvement.

The nature of R&D work

For the Research Tax Credit, three categories of R&D operations are eligible:

  • Fundamental research: experimental or theoretical work undertaken to acquire new knowledge (analysis of scientific properties or natural phenomena, of technical structures).
  • Applied research: applications developed to understand the results of fundamental research.
  • Experimental development: all work carried out using prototypes or pilot installations and based on knowledge gained from research and practical experience, with a view to launching the manufacture of new materials, devices, processes, systems, products and services, or to substantially improving them.

The required company size

From the sole proprietorship to the large group, the CIR is open to all industrial, commercial and agricultural structures subject to corporate income tax (IS) — or personal income tax (IR) in the BIC category. Non-profit associations governed by the 1901 law can also benefit.

Expenses eligible for the CIR

The Research Tax Credit base takes into account:

  • Staff costs (researchers and research technicians) directly assigned to R&D work
  • Depreciation charges on assets and buildings dedicated to research
  • Outsourced research expenses entrusted to any public body, university or foundation recognised as being of public utility.
  • Operating expenses
  • Expenses entrusted to private research bodies accredited by the Ministry of Research
  • Expenses related to individual protection (patent fees, trademark filing)
  • Technology watch expenses
  • Expenses for standardising the company’s products
  • Expenses related to developing new collections for companies in the textile-clothing-leather sector

The CIR rate

The Research Tax Credit lets you recover 30% of research expenses up to and including 100 million euros (5% above 100 million euros).

Note that when a company entrusts all or part of its R&D to a public body (a laboratory or university), the CIR rate is doubled. The CIR rate is increased to 50% for companies located in the French overseas departments and Corsica.

The time required to benefit from the CIR

There is no time limit to make use of it. You can claim it every year as long as research work eligible for the scheme is carried out.

The CII: tax relief to help SMEs develop innovation

There are two tax credit tools because they fund two different types of scientific and technical development. While the CII focuses on innovation expenses, the CIR concerns those tied to Research and Development.

Good news for you, small and medium-sized enterprises! The Innovation Tax Credit, an extension of the CIR, is designed for you. Yet many companies are still unaware that this measure can give their activities a real boost. So, who can claim the CII? What are its strengths?

What is the CII?

An innovation eligible for the CII is a product or tangible/intangible asset that meets the following conditions:

  • It is not yet on the market
  • It stands out from the competition by demonstrating its novelty on the relevant market
  • It offers superior performance to existing or previous products in terms of technology, ergonomics, eco-design or functionality.

Which work is covered by the Innovation Tax Credit?

The CII subsidises operations to design prototypes of new products or pilot installations of the same nature. Unlike R&D, which is scientific or technical in scope, the notion of innovation relates to the market and competition.

  • Designing the prototype: developing procedures, technical specifications and functional characteristics, technical studies, etc.
  • Configuration and engineering: changes made to processes, production and quality-control standards, and the software required to manufacture the new product.
  • Testing and evaluation: which reveal superior performance.

The CII: for which companies?

This tax relief is aimed exclusively at small and medium-sized enterprises that have:

  • A workforce of fewer than 250 people
  • An annual turnover less than or equal to 50 million euros
  • A total balance sheet less than or equal to 43 million euros

What CII rate can you benefit from?

You can obtain a 20% Innovation Tax Credit, capped at a maximum of €80,000 per year. The CII rate is also increased to 40% for companies located in the French overseas departments and Corsica.

Unlike the CIR, the CII rate is not doubled if you call on a public provider. But these two tax credits can be combined: a company can benefit from both the Innovation Tax Credit and the Research Tax Credit.

The declaration is made using the same Cerfa form No. 2069-A-SD and under the same terms as the research tax credit (CIR).

Which profiles are accepted?

Unlike the CIR, which requires an engineer, researcher or research technician, the innovation work eligible for the CII can be carried out by engineers and PhDs, developers, industrial designers, graphic designers, UX/UI experts, and so on.

CII and CIR accreditation: opening up new horizons for your research and innovation projects

CIR & CII: is it for me?

To benefit from this tax credit for your R&D operations or your innovation work, you must call on a provider that holds the CIR or CII accreditation granted by the M.E.S.R.I. IMASCIENCE, for its part, is accredited under the Innovation Tax Credit (CII): by working with us, your innovation projects become eligible for the deduction.

What does that mean for you? Any private company in the industrial, pharmaceutical or medical sectors that calls on this expertise can obtain a tax deduction on the expenses incurred in research or innovation and recover part of the services invoiced.

  • A glimpse of projects eligible for the CIR and CII (link to Gallery) for a pharmaceutical laboratory, industrial maintenance, a nanotechnology process, the journey of a cancer molecule, the presentation of a new technology, and more.

A CIR/CII accreditation: a genuine opportunity that lets you fund new projects, innovative concepts and technological advances that you might not have dared to pursue before, for fear of financial risk.

Certified skills to support you in bringing your ideas to life. Now that you know all there is to know about the CII and CIR, there is no reason to stay cautious about your projects — put your progress forward.

Have an idea for an innovative project?

Bring it to life with interactive and digital solutions, eligible for the Innovation Tax Credit and created by experts who master science, communication and visual storytelling:

  • 3D modelling of realistic visuals
  • 3D animation of products, cells, structures and processes
  • Virtual reality prototype
  • Immersion in a virtual industrial environment
  • Integration of a concept into a virtual scientific universe

Christophe Martin
Founder of Imascience