RESEARCH AND DEVELOPMENT: WHAT IS THE “RESEARCH TAX CREDIT”?

The research tax credit is a tax benefit granted to businesses for research and development work. Its purpose is to support the company’s research and thus promote its development. A credit gives the right to a refund if the amount of tax is less than the tax credit. But how to obtain professional financing?

COMPANIES BENEFITING FROM THE RESEARCH TAX CREDIT

As we have seen, the research tax credit (RTC) is intended for businesses of all sizes and in all sectors of activity. However, the law sets out the conditions that must be met in order to benefit from this tax credit. Firstly, firms in the industrial, craft, commercial and agricultural sectors are eligible for this scheme provided that they are subject to corporation tax or income tax under the heading of Industrial and Commercial Profits. Thus, companies that are exempt from corporation tax are not entitled to this tax credit. However, the legislation does grant a few exceptions for young innovative companies, as the companies are located in an assisted zone.

WHAT RESEARCH EXPENSES ARE ELIGIBLE FOR THE RESEARCH TAX CREDIT?

The RTC is also granted for certain categories of expenses. Expenses incurred for basic research activities can be advanced. The amount of public aid must be deducted from these expenses concerned. The research operations must be located within the European Economic Area. A prior application must be made to the tax authorities (the Tax Services Directorate) to ensure that the research costs are eligible for this tax advantage. The latter generally responds within three months. If you have already benefited from this tax credit, you will have to wait five years to renew your application. In order to obtain the tax credit, the company must gather a few supporting documents.

KNOW THE AMOUNT OF THE TAX CREDIT GRANTED

The rate of the appropriation is set at 30 % for research expenditure of less than EUR 100 million and 50 % for firms located in the overseas departments. For expenditure above this amount, it is 5%. The State grants repayable advances to companies. They will be subtracted from the value of expenditure eligible for the CIR. The tax credit is deducted from corporation tax or income tax in the year in which the expenditure was incurred. If the amount of the tax credit is higher, the excess will be recorded as a claim on the State, which can be used to pay taxes for the next three years. However, immediate restitution is possible for SMEs, new companies, companies in receivership and young innovative companies.

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