The 2013/03/05 at 08:13
Regularly at the heart of debates, innovation in the private sector is once again subject to new regulations. True, the 2013 version of the CIR (Crédit Impôt Recherche or Research Tax Break) brings its share of advantages, but it also adds an extra layer on the difficult-to-digest club sandwich of company tax rules. “Unfamiliarity with systems and a lack of information are still problems. This is why we are organising information days. The idea is to clarify things for SMEs,” underlines Tiphaine Guittat, Industry and Innovation Adviser at the CCI of Grenoble and local Coordinator of the Ecobiz network.
In order to encourage the competitiveness and development of French businesses, several provisions have been adopted in the framework of the 2013 French Finance Law. Frequently reformed in recent years, aids aimed at supporting innovation have had a makeover. The creation of the CII (Crédit Impôt Innovation or Innovation Tax Break) has been enacted. Parallel to their R&D expenses, SMEs can now benefit from this extension of the CIR corresponding to 20 % of the sum of certain innovation expenses made from 1 January 2013 onwards. With a ceiling rate of 400,000 euros per year, these expenses are related to upstream work in the R&D phase for the design of a new product, that is, any tangible or intangible property not yet available on the market. The new product needs to stand out from products already in existence or previously set up, by the improvement of performance on the technical, eco-design, ergonomic or functional front. The prototype or pilot installation of a new product needs to be used as the model for the creation of a new product and should not be commercialised.
This new measure fills in a gap that has existed until now between the R&D phase and pre-commercialisation, by taking into account expenses for pre-production prototyping, ergonomics of the product, or else design expenses, not eligible for the CIR. But beneficiaries of these two aids will need to double up their vigilance. To be sure of benefiting from the CII, it is necessary to clearly define the innovative characteristics of their product or service, namely in relation to the competition. Prospective beneficiaries will also need to pay attention to the frontier between R&D activities and innovation.
The CIR represents 30 % of R&D expenses, whereas the CII accounts for 20 % of sums invested in innovation. Specific materials, spaces, or staff used are elements taken into account or not for the calculation of tax aids, depending on the case. “We set up practical workshops with specialists such as tax experts, on special days organised to tackle all these questions concretely, such as the one organised on 14 March. Our objective is to be as pragmatic as possible in presenting the CIR and the novelties relating to the scheme that have been introduced. This is to help interested parties to see things more clearly,” indicates Tiphaine Guittat.
According to a survey published by the Alma Consulting Group in 2012, the proportion represented by the CIR in R&D financing is growing. It represents an average of 15 % of the financial resources used by an innovative enterprise. The global share of external financing comes to 34 %, compared with 27 % in 2011, making businesses more dependent on this scheme. 70 % of the CIR is re-injected by companies into R&D expenses, job maintenance, equipment and patent-related expenses. The other 30 % is used for cash flow, namely in the case of SMEs. Note that the proportion devoted to cash flow was 13.5 % in 2011, highlighting the strategic importance of the scheme in the lives of businesses in the crisis context.
The new reform also provides security for the CIR thanks to greater flexibility for the “rescrit fiscal” (tax rescript). Remember that in France, this is a document allowing a company to present to the tax administration the nature of its projects, associated foreseeable expenses and administrative elements, allowing its situation to be assessed regarding the criteria for eligibility for the CIR. It thus is a way to obtain a formal decision from the tax administration and to avoid any fears regarding any possible tax inspection procedures. The 2013 Finance Law also foresees the possibility of requesting a tax rescript up to 6 months before the tax declaration is lodged.
Until now, such requests had to be made before R&D projects were launched, that is before the 1 January of the year works were to be undertaken. Requests can now be sent from 1 January 2013 onwards for R&D projects (eligible for the CIR) and from 1 January 2014 onwards for innovation projects (eligible for the CII). In the case of projects taking place over a number of years, the request must be lodged at least 6 months before the deadline for the lodging of the first declaration.