Launched in 2013, the Innovation Tax Credit (CII) is a measure aimed at small and medium-sized enterprises (SMEs) that is struggling to attract attention in France. It is estimated that one in three companies is unaware of the existence of this scheme! Created two years ago, the CII has had a hard time finding its way among entrepreneurs, even though this measure is likely to give their activities a real boost. So what are the strengths of the Innovation Tax Credit?

The principle of the Innovation Tax Credit

This is an aid scheme for innovative companies set up by the 2013 Finance Law, which complements the existing Research Tax Credit (CIR). This tax measure provides financial support to SMEs that decide to make investments dedicated to innovation. All companies with fewer than 250 employees and a turnover of no more than €50 million are eligible for this scheme. The CII gives access to concrete aid for undertaking very specific expenses within the company. This concerns the design of prototypes and pilot installations for new products. The financial contributions provided by the Innovation Tax Credit can be applied to different types of expenses, such as the salaries of employees responsible for the creation of new products or the costs of patenting.

The CII/CIR complementarity

SMEs mainly criticize the fact that the scheme does not cover the financing of research and development work, which still falls within the framework of the research tax credit. Indeed, the applicable rate is 20% for the CII, while it is 30% for the CIR. Companies therefore focus on the CIR and ignore the CII for the most part, without taking into account the possible complementarity between the two schemes. This is the main advantage of the measure for small and medium-sized enterprises: these two tax benefits can be combined effectively to reduce costs significantly. Many companies are unaware that they are eligible for the CII scheme, the limits of which are more blurred than those of the CIR. In reality, a great many companies can claim the CII, even if it has some limitations. Only product innovations are concerned, not services.

Increased market share

While the interest of using the CII seems unclear to many SMEs, the companies that use the scheme are very satisfied with the results obtained. A study showed that seven out of ten user companies recognize that the measure has allowed them to launch new products more easily. Even more importantly, one in two believes that the scheme has given them the opportunity to gain market share by being able to offer a prototype more quickly and under better conditions. In practice, this measure turns out to be less easy to implement for companies than the CIR, as it is more restrictive, but the benefits that can be drawn from it are numerous. SMEs wishing to develop a new product therefore have every interest in building a solid file in order to claim the Innovation Tax Credit.

Additional Information

• The Innovation Tax Credit is a refundable tax credit that can be used to offset corporate income tax liability.
• The CII is available to SMEs that invest in innovation activities, such as the design of prototypes and pilot installations.
• The CII is worth 20% of eligible expenses, up to a maximum of €200,000 per year.
• The CII can be combined with the Research Tax Credit, which is worth 30% of eligible expenses.