Is Your Business Eligible for the Innovation Tax Credit (CII)?

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Are you planning to launch an innovative project? If so, your company might qualify for the Innovation Tax Credit (CII), a scheme specifically designed for small and medium-sized enterprises (SMEs). As an extension of the Research Tax Credit (CIR), this incentive supports eligible companies under specific conditions. Here’s a full breakdown of how it works.

What’s New in 2025?

Under the 2025 Finance Act, the CII program has been extended through December 31, 2027. However, the credit rate has been reduced from 30% to 20%.

Who Can Apply for the Innovation Tax Credit?

The CII is open to SMEs operating in industrial, commercial, or agricultural sectors. To be eligible, companies must either:

  • Be taxed under a standard or simplified real tax regime (corporate tax or personal income tax), or

  • Be exempt from taxes and fall into one of the following categories:

    • Young Innovative Enterprises (JEI)

    • Businesses formed to take over struggling companies

    • Businesses located in special zones, such as:

      • Regional Aid Zones (AFR)

      • Urban Free Zones / Entrepreneurial Territories (ZFU_TE)

      • Employment Redynamization Areas (BER)

      • Defense Restructuring Zones (ZRD)

      • Overseas free-trade zones

      • Rural Revitalization Zones (ZRR) and France Ruralities Revitalization Zones

      • Urban Development Zones (BUD)

      • Priority Development Areas (ZDP)

What Types of Projects Are Covered?

The CII applies to projects that involve designing a prototype or pilot model of a new product.

To qualify, the product must:

  • Not yet be available on the market

  • Offer significantly improved features compared to existing products (e.g. better performance, eco-design, functionality, or ergonomics)

Note: The prototype must not be intended for commercial sale; it should only serve as a model for product development.

What Expenses Qualify for the CII?

The following costs can be included:

  • Depreciation of new equipment or buildings used for scientific, technical research, or prototype development

  • Costs not covered by insurance in the event of loss or damage to eligible property

  • Personnel expenses, including:

    • Researchers and technical staff exclusively dedicated to R&D

    • PhD holders (or equivalent) on permanent contracts — double cost accounted for the first 2 years if headcount hasn’t decreased

    • Employees rewarded for inventions following research work

  • Depreciation of patents and plant variety certificates

  • Legal expenses related to patent or design protection (e.g. attorney fees, court costs)

  • Fees for design/model registration

  • Costs for outsourced R&D activities conducted by accredited engineering or consulting firms

Important:

  • The total eligible expenses are capped at €400,000 per year.

  • Expenses already claimed under the Research Tax Credit (CIR) cannot be reused here.

  • Costs related to the production phase of prototypes or pilot models are not eligible.

What Are the Applicable Tax Credit Rates?

The rate depends on where your business operates:

  • 20% for companies in mainland France

  • 60% for those in French overseas departments

  • In Corsica:

    • 40% for small businesses

    • 35% for medium-sized businesses

Note: Public grants must be deducted from the expenses claimed under the CII.

The credit is calculated per calendar year (January 1 – December 31), regardless of your company’s fiscal year-end.

How to Apply for the Innovation Tax Credit

To claim the CII, businesses must complete form no. 2069-A-SD, the same used for the Research Tax Credit, and attach it to their tax return.

For Corporate Taxpayers (IS)

  • Deadline: By the 15th day of the fourth month following the fiscal year-end

  • Submission options:

    • Online tax account (EFI)

    • EDI-TDFC electronic filing

For Income Taxpayers (IR)

  • Deadline: Within 15 days after the second working day following May 1st

  • Submission options:

    • Online professional tax account (EFI)

    • EDI-TDFC electronic filing

How Can the Tax Credit Be Used?

The CII can be deducted directly from the income tax (IR) or corporate tax (IS) owed. If the credit exceeds the tax due, the remaining amount can be used to offset taxes over the following three years. After that, any unused balance is refunded.

Some companies may be eligible for an immediate refund, including:

  • Businesses created through mergers, acquisitions, or restructuring

  • Companies under two years old

  • Young Innovative Enterprises (JEI)

  • Companies undergoing conciliation, safeguard, restructuring, or judicial liquidation

How to Request a Refund

Requests must be submitted online via impots.gouv.fr in your professional account:

  • Corporate taxpayers (IS): Go to “Declare” → “Corporate Tax”

  • Income taxpayers (IR): Submit during your annual income tax return via the professional account