Innovative companies : how to get tax credits ?

the 02 October 2017 – Anne MOREAUX – Right

© DR

The firm 11.100.34 boosts the innovative start-ups. During a morning cheerfully called ” Good morning France “, the firm’s ultra-connected invited at its premises located at the central Garage, in the 10th arrondissement of Paris, young entrepreneurs and two experts of the monitoring records of the research tax credit.

After having presented his firm specialized in the accompaniment of start-up, the lawyer Clarisse Berrebi, warmly welcomes the stakeholders, Laurent Geraud, deputy chief at the ministry of Research, and Nicole Levy, an expert in computer science at CNAM, came to explain to his customers how to use the levers of access to public funds.

“A lot of customers do not necessarily know these devices,” said Teacher Estelle Joan

The stakeholders engage in the detailed presentation of the three forms of tax aid to Research and Development (R&D), as well as the innovation of French companies : the research tax credit (CIR), the tax credit innovation (CII), and the status of young innovative company (JEI).

“A lot of customers do not necessarily know these devices,” said teacher Estelle Joan, so they represent a real financial challenge “, at the time of the creation of a start-up as a sale, because they allow to promote it. This is why the firm 11.100.34 is developing a series titled “Swag Your Tax” at the destination of startuppers, ” to take flight to these emerging structures, future nuggets of the French economy “. The lawyers provide as well advice and tailored support to ensure that their customers can take advantage of the devices of tax incentives.

The research tax credit

Laurent Geraud begins with the presentation of the RIC, a mechanism in place since 1983 and the reform, which entered into force in 2008, has led to the explosion in the number of beneficiaries, which now stands at 23,000, for a total amount of receivables of € 5.7 billion.

Open to all companies, whatever their size and sector of activity, the device contains two panes : the IRC itself and the innovation expenditure. It aims to help companies to bear the costs of R&D teams and access to high-level skills in order to strengthen their competitiveness.

It is applicable to 3 major R&D activities : basic research, applied research and experimental development (the most used by the companies). This type of activity is defined by the Frascati manual, published by the OECD in 2015 (see box below).

Nicole Levy insists strongly on the need to consolidate the five scientific elements defined by the Frascati manual to present his case CIR.

Laurent Geraud, tries, meanwhile, to get the message out to contractors to properly archive their research and to demonstrate how they found the answer to the questions they were asked during the creation of their commercial product. Attention, ” the research is never the business model of the start-up, but just the means to the creation of the service offer or product.”

What is a research activity ?

The Frascati manual, published by the OECD in 2015, list five cumulative criteria to characterize an activity within the scope of R&D. The activity must thus include an element :

  • of newness : aim at obtaining new results ;
  • creativity : based on notions and assumptions that are original and non-obvious ;
  • uncertainty : be uncertain about the final outcome ; and be
  • 4. systematic : join planning and budgeting ;

    5. transferable and/or reproducible : lead to results that it is possible to reproduce.

    Laurent Geraud then explains how to calculate the plate CIR – “easy now” – by taking into account the allocations of investment, the salaries of the staff researcher, (x2 for the young doctors, technicians), the operating costs, the research sub-contracted to the public, licensed private, the fees and expenses of attorneys and VOC, the expenses of standardisation, and technological, subsidies and repayable advances, and finally the provision of advice.

    Nicole Levy mentioned the possibility of recruiting the young doctors in the first CDI ” a very interesting opportunity financially.” “All the companies that I have encountered have told me that it was a filler more than satisfactory,” confirmed Laurent Geraud.

    The CIR is equal to 30 % of base up to 100 million euros (the rate is increased to 50% in the DOM) and 5 % beyond that.

    The tax credit innovation

    Established since 2013, the ITC is an additional expense, integrated CIR, 3 of 354 companies were able to benefit in the first year, with an amount of 74.4 million euros of debt to 372.3 million of the expenditure declared.

    This device is limited to SMES, unlike the CIR, which prove that their product is new to the market and other products from their range. It has the same base, but less accurate and simpler to calculate. It is equal to 20% of the plate, with a ceiling of 400 000 euros. It aims to encourage small businesses to innovate and increase the impact of the CIR on growth and employment.

    It is the DGE and the Direccte, which give the accreditation CII, whereas it is the ministry of Research that allocates the CIR. This explains that it is a bit long to put in place, because some services of the administration are clogged. “On average, it takes between 2 and 4 months “, explains Laurent Geraud.

    The status of young innovative company

    “I, JEI is not really an innovation but of the research,” stresses Nicole Levy. Since its creation in 2004, 6 600 businesses have already benefited of this status correlated with the CIR, the latest version of 2017 has been extended until 2019.

    To enjoy it involves five conditions : to be an SME ; having less than 8 years old ; to be really new start-up created ex nihilo ; to be independent (at least 50 % of the capital held by natural persons ; make expenditures of research important (at least 15 % of its expenses).

    This statute granting a tax benefit, a result with a total exemption of tax on the profits on the first profitable year, and the exemption from employers ‘ contributions of all the employees who are doing the research.

    Pitfalls to avoid

    To be entitled to these devices, “the famous case is the most important part” for the experts.

    Clarrisse Berrebi insists on the need for startuppers to take upstream ” and don’t wake up after several years of saying to oneself : hold I’ve done the R&D “.

    Even if it is nowhere written in the law, in practice, the company must produce a document type to be able to prove and justify his / her research project.

    “The goal is not to make a face to a control, but to determine what are the amounts to put in the plate of the tax credit,” explains Laurent Geraud.

    Attention, the R&D project is not a commercial project, ” they are two completely different things ! “. The research activity does not always lead to a result. Half of the applications of CIR are in the it sector, this poses many problems, including the differentiation between the commercial product and the product search. “Often, the creation of a software, even if it is new, is not an innovation,” says Nicole Levy.

    “This is not an administrative document but well in science,” stresses Nicole Levy.

    Contractors must properly complete the declaration 2069-A-SD, written over the development of research, by people who have actually worked, and will be read by scientists.

    “This is not an administrative document but well in science,” stresses Nicole Levy. “It is very important that we understand what a project includes the work of research,” she explains. The important thing is to ” describe the lock technical and scientific that seeks to remove “, including a description of the state of the art, and then the demonstration of what has been achieved.

    “There is no need for 100 pages ! A good dynamic analysis of the things in 20 pages is enough, ” says Laurent Geraud.

    Of course, everything is put in place to ensure confidentiality. All these files are on a server ultra-secure and read spar staff have signed privacy policies. “That is why, it is important that researchers in the public domain, to avoid the conflict of interest,” says Nicole Levy.

    Experts advise startuppers to always ” keep the hand on their record “ and not to outsource it to consulting firms or lawyers. They must be able to present it, this means knowing the devices and control the workings.

    Clarisse Berrebi, confirms : “so, Is that you would come up with the idea of presenting a folder that is mounted by a third party private investors ? Well, it’s exactly the same thing for the public investor ! “.

    Laurent Geraud invites young entrepreneurs to ” do not flee the tax administration “ but rather to submit to it before launching.

    Final warning : the administration is entitled to check if the items reported are in compliance with the texts and can initiate the procedure of reclassification and straighten businesses up to three years after the filing of the declaration. The startuppers have to be in the nails.

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