Innovation tax credit: a SME dedicated scheme completing R&D tax credit

Created by the Finance Law in 2013, Innovation Tax Credit completes R&D Tax Credit and aims to support SMEs that engage in innovation activities. Unlike R&D Tax Credit, there is a limitation in the size of the eligible companies: Industrial, artisanal, commercial & agricultural companies are eligible Innovation Tax Credit if they correspond to the European definition for Small & Medium sized Enterprises (SME):

  • Less than 250 employees,
  • Turnover under 50M€, or total assets under 43M€.

Innovation Tax Credit (ITC) enables companies to get a 20% Tax Credit rate on their expense dedicated to Prototypes Design and pilot installations for new products. Eligible expense is limited to 400 000 € per year and per company.

How to claim and secure an innovation tax credit claim?

As for R&D Tax Credit, the company must fill the 2069-A-SD cerfa form and join it to its tax return. The claiming deadline is set to 3 months and 15 days after closing date, with an exception for companies closing on 31/12. In that case, the deadline is on May 15th.

For Income tax submitted companies, delays are shortened by 15 days. Innovation Tax Credit is compatible with R&D Tax Credit, as they address different types of activities. SMEs can ask for the administration’s prior agreement to the claim, to secure eligibility of innovation activities. This prior agreement is called rescript, and the application must be sent to the relevant corporate tax service.

Innovation Tax Credit Claims can be audited, initiated by tax administration or by the Ministry of Industry. This audit can cover both the eligibility of the activities and the calculation of the Tax Credit.