France introduces a new R&D tax credit for collaborative research work

France has introduced a new research tax credit (“R&D tax credit”) in the framework of collaborative contracts between public and private entities (“Collaborative R&D Tax credit” or French “CICo”).

Private companies will be eligible for this new Collaborative R&D Tax credit if they agree collaborative contracts (between 1^st January 2022 and 31 December 2025) with “R&D Organisations” dedicated to independent industrial research or experimental development activities.

The private companies and the R&D Organisation should not be affiliated, and the R&D Organisation should be accredited, through a ruling granted by the French Ministry of Research.

In this respect, the collaborative contracts should include compulsory provisions, notably:

• be concluded prior to any R&D works,
• be remunerated at cost and
• cover a maximum of 90% of the total R&D expenditures incurred by the Organisation,
• the results including the IP rights cannot be granted in full to the private companies under the contract
• state the common objective pursued
• organise the condition for sharing the risks and results of the collaborative works
• grant to the Organisation the rights to publish the results of the collaborative contract.

R&D works should be located within the EU or EEA countries which concluded an administrative assistance agreement with France (Norway, Iceland, Lichtenstein).

The R&D works should be carried out directly by the Collaborative R&D Organisation, with the possibility to sub-contract with another accredited Collaborative R&D Organisation some of the works subject, if it is specifically mentioned under the main collaborative contract.

The private entities will benefit from a tax credit equal to 40% of the R&D Organisation expenses, up to 6 million euros per year, leading to a maximum tax credit of 2.4 million euros per year, which could reach 3 million euros (50% of the R&D Organisation expenses) for small and medium-sized companies (SME) (as defined in Community regulations).

Private entities will be entitled to request a prior ruling to secure their positions.

The collaborative R&D tax credit can be offset against French corporate income tax due the same year or against the taxes due in the three years that follow. At the end of the 3-year-period, the unused tax credit can be refunded in cash. The tax credit is immediately refundable for SMEs or innovative start-ups (JEIs) and companies under amicable settlement or safeguard procedure.

This new incentive tax regime will help to develop public-private collaborative research and increase the R&D tax credit granted by the French State, which cost approximately 6.4 billion euros in 2021 and represents 65% of the innovation aid granted to companies.