Could Your Business Qualify for the Innovation Tax Credit (CII)?

/in /by

If your company is preparing to develop a new and innovative product, you may be eligible for the Innovation Tax Credit (CII)—a scheme designed to support small and medium-sized enterprises (SMEs). As an extension of the Research Tax Credit (CIR), the CII encourages product innovation through tax relief, provided specific criteria are met.

2025 Update

The 2025 Finance Act has extended the CII until the end of 2027 and lowered its base rate from 30% to 20% for companies in mainland France.

Who Is Eligible?

The credit applies to SMEs in the industrial, commercial, or agricultural sectors that are either subject to corporate income tax or income tax under a real tax regime, or exempted companies that fall into categories such as:

  • Young Innovative Enterprises (JEI)

  • Businesses located in targeted economic zones (e.g., ZRR, ZFU-TE, BER, ZDP)

What Kind of Projects Are Covered?

CII applies to projects focused on developing new products that meet two conditions:

  • They are not yet available on the market.

  • They offer significantly improved technical features, eco-design, ergonomics, or functionality compared to existing products.

Note: The prototype must not be intended for sale but serve as a model for future production.

Eligible Expenses

Qualifying costs include:

  • Depreciation of newly acquired equipment or buildings used in innovation work.

  • Personnel costs for researchers and technical staff dedicated to R&D.

  • Double-cost recognition for PhD holders in the first two years of permanent contracts.

  • Depreciation of patents and plant variety certificates.

  • Legal fees related to intellectual property.

  • Expenses paid to accredited subcontractors for R&D or prototype development.

CII cannot include production costs or any expenses already claimed under the CIR. The maximum eligible amount is capped at €400,000 annually.

Tax Credit Rates

  • Mainland France: 20%

  • Overseas departments: 60%

  • Corsica: 40% for small, 35% for medium-sized businesses

Public subsidies must be subtracted from the base expenses before calculating the credit.

How to Apply

Use Form 2069-A-SD (same as for the CIR) and submit it with your corporate tax return.

  • For corporate tax (IS): File online by the 15th day of the 4th month after the fiscal year ends.

  • For income tax (IR): File online within 15 days after the second working day following May 1st.

Using or Claiming the Credit

The credit is first used to reduce your tax liability. Any unused amount can be carried forward for up to three years or refunded thereafter. Some businesses may claim an immediate refund, including:

  • New companies (less than 2 years old)

  • JEIs

  • Businesses undergoing restructuring or judicial recovery