Research tax credit (crédit d’impôt recherche)

The research tax credit is the tax incentive under Article 244 quater B of the French General Tax Code that allows industrial, commercial or agricultural businesses taxed under an actual-profit regime to deduct from their tax a fraction of the research expenditure they incur. It is the main French instrument of public support for private research. It is accompanied by a component specific to small and medium-sized enterprises, the innovation tax credit, which covers the design of prototypes and pilot installations for new products.

Eligible operations

The tax credit covers basic research, applied research and experimental development, within the meaning of the OECD Frascati Manual. The operation must seek to resolve a scientific or technical uncertainty that the state of the art cannot resolve, and must involve novelty or substantial improvement. Routine improvement or the development of software using known techniques is not eligible. The state of the art must therefore be documented, much as the assessment of inventive step for a patent requires, even though obtaining a title is neither necessary nor sufficient.

Base and rate

The base includes, in particular, depreciation of assets used for research, staff costs for researchers and technicians, operating costs calculated on a flat-rate basis, research subcontracted to approved bodies and certain standardisation expenditure. The Finance Act for 2025 narrowed the base, in particular by removing patent costs and technology watch and by reducing the flat-rate operating allowance. The rate is thirty per cent of expenditure up to one hundred million euros and five per cent above that. The innovation tax credit for small and medium-sized enterprises has a separate rate and cap, amended by recent Finance Acts. Public grants received for eligible projects are deducted from the base.

Audit and securing the credit

The tax credit is claimed on a specific form and may be set off against tax, refunded immediately for certain businesses, in particular small and medium-sized enterprises and young innovative companies, or refunded after three years. The tax authorities may audit it during the limitation period and seek the opinion of the ministry responsible for research on whether the work was genuine. Challenges most often concern the characterisation of the scientific uncertainty and the justification of staff time. A technical file contemporaneous with the work is indispensable, and an advance tax ruling can secure a project’s eligibility before it begins. The expenditure taken into account interacts with the patent tax regime.

Key points

The research tax credit refunds thirty per cent of eligible research expenditure up to one hundred million euros, provided the work resolves a genuine scientific or technical uncertainty. The base and related schemes are amended almost every year by the Finance Act. Build the technical file as the work progresses, document the state of the art, and seek an advance ruling for significant or unusual projects.

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This glossary entry is general in scope and does not constitute legal advice.

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