The fundamentals of the Research Tax Credit (CIR)

Introduction

The Research Tax Credit (CIR) aims to boost companies' competitiveness. It encourages them to conduct research and development activities.

It is a declarative principle that will reduce your taxable income. There are very few conditions to be eligible for this scheme: being subject to corporate income tax or personal income tax.

01 | Activities eligible for the CIR

The research eligible for the Research Tax Credit (CIR) is only a part of the research you conduct. This includes activities that use a scientific approach to solve technical challenges. These challenges are problems with no known solutions in the literature.

The core of the CIR scheme is identifying the specific technical challenge you want to overcome.

02 | The three types of research eligible for the CIR

Fundamental Research

This type of research aims to gain new knowledge that explains observable principles in nature. Large research institutions, like France's CEA, CNRS, and INRA, often conduct this type research. They aim to explain phenomena and publish in scientific journals, but do not target specific applications.

Applied Research

This research aims to apply the principles of fundamental research and gain new knowledge that will be applicable in a specific field.

Experimental Development Research

This is the most common type of research found in companies. This research is systematic. Its goal is to acquire new knowledge. It aims to either improve existing materials, products, processes, or services, or to launch new ones. In these research operations, it is crucial to adhere to the five criteria from the Frascati Manual.

03 | The 5 criteria to respect from the Frascati Manual

In experimental development, here are five questions to ask. They will verify that your work meets the Frascati Manual's 5 criteria:

Novelty

Is the research operation that you have launched, the systematic work that you have carried out, aimed at acquiring new knowledge?

Creativity

Does your approach to solving the problem involve innovative solutions or methodologies?

Uncertainty

Are the outcomes of this activity uncertain, and are there risks associated with achieving these results?

Systematic

Does the activity follow a structured plan with clearly defined steps to reach the set objectives?

Transferability and/or reproducibility

Can the results obtained be transferred to other contexts or reproduced in other studies?

04 | R&D Operations Eligible for the CIR

Within the Research Tax Credit, there is a distinction between the research and development project and the eligible research and development operations.

Often, we talk about R&D operations, but you can think of it in terms of "sub-projects."

This means that you have an overall project to launch a new product. To do this, you will need to carry out a series of operations or sub-projects. Not all of these operations are eligible as they do not all meet the five Frascati criteria.

You will need to identify among all the operations in your R&D project the ones that meet the five Frascati criteria. Only those operations will be eligible for declaration under the Research Tax Credit!