French Research Tax Credit

The Minister of Economy, Finance and Industry and the Minister of Higher Education and Research presented a paper on the review of the research tax credit (CIR).

Private Research and development (R & D) is a key factor for increasing business productivity, exports and business results. Thus, CIR is one of economic policy instruments which affect the long-term growth rate.

The CIR was radically reformed in 2007 to reverse the downward trend of the research effort of the private sector in France. This reform has simplified and greatly amplified the device, which is now sitting on all of R & D reported by businesses.

This reform has produced the desired results, increasing the attractiveness of this device, especially for small and medium enterprises (SMEs), industry and investment.

The number of companies reporting increased by 60% between 2007 and 2009 and 80% of new registrants in 2009 were SMEs. Companies have also increased their R & D in 2009 (1.1%), while GDP recorded a decline over the same period, and they have tripled their recruitment of young doctors.

The relationship between public and businesses have also been boosted, with an increase of over 50% of expenditure declared under the CIR for projects conducted in cooperation with public research.

Smaller firms have proportionately more applied for the device than the rest of the industry. In 2008, the beneficiary companies with fewer than 250 employees received an independent part of RIC more than their share of the expenditure declared (20% and 16%), so that the rate of CIR (CIR / declared expenditure) was 39 % for companies with fewer than 250 employees and 22% for those over 5000 employees.

The industry is by far the largest beneficiary of the CIR: in 2008, manufacturing industries are 73%, services-based information technology for almost 12% and other services for almost 15%. The first two sectors are the beneficiaries electrical and electronics industry (17% CIR) and the pharmaceutical industry (15% CIR).

Finally, the CIR has increased the attractiveness of France, as illustrated by the tripling between 2008 and 2010 of the number of foreign investment projects in R & D in France.

It is now important to ensure the stability of the CIR and strengthen legal security for business users. In this regard, a draft tax instruction on the definition of R & D operations is currently undergoing public consultation and will be published soon.

The tax credit reform and ensuring its stability reflect the Government’s determination to pursue structural reforms to enhance the potential of medium-term growth of our economy.