Is the Research Tax Credit still popular with companies?

by bold-lichterman

Created by the 1983 finance law, and made permanent in 2004, is the CIR (Research Tax Credit) undergoing a new transformation? Criticized by professionals for its complexity and the sticky returns of tax adjustments (which can take place after the payment of aid), the device has not always been unanimous.

The National Digital Council had strongly criticized it last June, when the Digital Republic project was presented. In the process, Syntec launched its support program for French digital SMEs, with the stated objective of helping them to use the CIR, and to avoid a tax audit.

A “virtuous” practice

In 2015, tech companies received an average of 40,000 euros less per declared project, a decrease of 45% in one year, according to Syntec. Is it a sign of disaffection with the system, or a simple refocusing of credit? A priori, it seems that the institution has decided to grant the CIR to fewer projects (4.3 projects on average per company in 2015, against 8 in 2014).

Published this week, the barometer “CIR in the digital world», Produced by the Syntec Digital, in partnership with F. Iniciativas therefore confirms the trend that emerged last December: the CIR now concerns a smaller number of companies. It should be noted that it is no longer just large groups capable of forming battalions of experts on public aid. Companies “have a virtuous practice of research tax credit”, notes Syntec.

Unsurprisingly, it is the software publishers who have benefited the most from this system, earning 59,897 euros on average per declared project (vs. 75,582 euros in 2014).

Finally, it should be noted that only 16% of the companies questioned within the framework of the barometer benefit from a CIR approval; On the other hand, 73% report their expenses for outsourced R&D services.

VSEs, big winners of the CIR

If we compare the evolution of the data provided by the barometer between 2014 and 2015, we see that beyond the decrease in the amounts received, it is the allocation policy that seems to have changed.

VSEs (i.e. companies hiring less than 10 employees) were the biggest beneficiaries of the system in 2015 (with an average amount per project up 13%). ETI-Large Enterprises (more than 250 employees), on the other hand, saw their average budgets more than halved (-59%).

Beyond the increase in the number of projects declared within VSEs, it should be noted that the average number of engineers employed is decreasing, regardless of the size of the company considered.

chalkboard
Source: CIR in digital barometer (February 2016)

Almost systematic checks despite the support

83% of companies say they are supported in their procedures (“to secure their declarations, and for lack of knowledge of the system”). However, 72% of them did not use the rescript procedure, which makes it possible to question the tax administration on their particular case (the answer it formulates is legally binding), and therefore to limit the risk of recovery. .

We learn from the barometer that 60% of declarations have been checked over the past five years, and that these checks mainly come from the tax administration. In 70% of cases, all of the company’s accounts are checked.

It should be noted that only 3% of the companies questioned had a penalty for willful misconduct.

cir-expenditure-controls
Q: Which lines of R&D expenditure were particularly examined during the audit?

The fear of tax audits

82% of the companies questioned believe that the CIR had a “significant” or even “very significant” impact on their R&D strategy. It enabled 31% of the companies surveyed to increase their investments in R&D, and 27% of them to recruit qualified personnel in 2015.

They are 36% to declare that they would reduce their investments in R&D if the CIR were to disappear; 25% would reduce their R&D staff. Finally, it should be noted that the CIR has enabled a quarter of the VSEs questioned to develop into new markets.

If the companies benefiting from the CIR seem convinced of its interest, brakes remain. A third of companies fear a tax audit (up 15 percentage points compared to 2014), and 16% say they are running out of time (+10 points this year).

cir-brakes
Q: What are the main obstacles to the use of CIR in your structure?

To reassure businesses, the Inter-Business Mediation also published last June a list of “competent” firms “recognized by the Ministry of the Economy”.

The opinion of F. Iniciativas

“Financially, the CIR system is very attractive for French companies: they can declare up to 30% of their research expenses in the form of tax savings. It is even one of the most attractive public aid systems ”confided to Frenchweb Téoman ​​Atamyan and Bastien Caillaut, respectively technical director and marketing and partnership director at F. Iniciativas, at the initiative of the barometer. “Companies like IBM or Facebook have established development centers in France, and have publicly communicated that the CIR was one of the criteria in the choice of the country” they add.

“Contrary to what we may hear, we are rarely in deadweight situations. The CIR comes into play as an element in its own right of project financing analysis from the outset, especially for the most technologically risky projects ”. Whether or not to benefit from the CIR can therefore be decisive in deciding whether to launch a project or not.

** Methodology: an online questionnaire was sent to members of Syntec Numérique and to clients of F. Iniciativas belonging to the digital sector, between October 15, 2015 and January 22, 2016. 164 companies responded (68% of VSEs , 19% of SMEs and 13% of ETI – Large Enterprises). Note: 55% of respondents are software publishers, 33% digital service companies, and 12% technology consulting companies. 93% of respondents achieve a turnover of less than 50 million euros.

READ also: A better used CIR, but a CII still unknown to SMEs

SEE the full barometer: