Who this is for: CFOs and founders of US companies with engineers in France, whether a full subsidiary or a small technical team, who want to know what the Crédit d’Impôt Recherche is actually worth to them, what changed in 2026, and how claims fail.
France subsidizes private R&&;D more aggressively than almost any other country, and the centerpiece is the CIR: a tax credit worth 30% of eligible research spend. For a US company with a French engineering team, that can mean six figures a year recovered. It is also a regime the 2025 finance law trimmed, with the 2026 law confirming the tightened rules, and one whose cash mechanics work differently for a subsidiary of a US group than the headline suggests. Both points belong in your model before you count the money.
Table of Contents
What the credit is worth
Eligible R&&;D spend | Credit rate |
Up to €100 million per year | 30% |
Above €100 million | 5% |
Overseas departments (DOM) | 50% below the €100M threshold |
The base is not your whole engineering budget. It is a defined set of expense categories, dominated by researcher and technician payroll, to which a flat allowance for operating costs is added. For spending incurred since 15 February 2025 that allowance is 40% of staff costs, down from 43%. On a €2M eligible payroll, the trim quietly removed €18,000 of credit. The official overview is on entreprises.gouv.fr.
What the recent finance laws changed
Item | Before | Now (spend from 15 Feb 2025) |
Operating-cost allowance | 43% of eligible staff costs | 40% of eligible staff costs |
Young doctorate hires | Staff costs counted double for 24 months | Advantage abolished |
Patent costs and technology watch | Included in the base | Removed from the base |
None of this kills the regime, 30% of a real R&&;D payroll remains serious money. The 2026 finance law, adopted in February, left the trimmed regime in place, 30% rate and €100M threshold confirmed. But claims copied forward from an old template now overstate the credit, and an overstated claim is exactly what draws a rectification. If your last CIR file predates the 2025 trim, it needs rebasing, not rolling.
The cash trap: why your subsidiary may wait three years
The line you will hear is that the CIR is “refundable in cash.” Here is the mechanism in full. The credit first offsets the entity’s French corporate income tax. What the tax bill does not absorb becomes a receivable on the Treasury, refunded after three years. Immediate refund in year one is reserved for a short list, and the item that matters here is SMEs under the EU definition.
That definition is assessed at group level, counting linked enterprises, your US parent included: fewer than 250 employees and either turnover at or below €50M or balance sheet at or below €43M, consolidated. A 40-person French subsidiary of an 800-person US company is not an SME. The consequence surprises almost every US CFO we meet:
Profile | When the CIR becomes cash |
French startup, independent, genuinely SME | Refunded the year after the claim |
French subsidiary of a mid-size or large US group | Offsets French tax first; unused balance refunded after 3 years |
Loss-making subsidiary of a large group | No French tax to offset, so the full credit waits out the 3 years |
The credit is still worth claiming in every row, it is real money with a date on it. But a model that books it as year-one cash for a group-owned entity is wrong, and financing decisions bui< on that model inherit the error. There are financing solutions against the receivable; that is a conversation, not a checkbox.
What actually qualifies as R&&;D
French practice follows the international Frascati logic: the work must attempt to resolve scientific or technical uncertainty that a competent professional could not settle with existing knowledge. Applied to what software and hardware teams actually do:
Activity | CIR position |
New algorithm or model where the approach is genuinely uncertain | Eligible |
Prototype development and experimental trials | Eligible |
Routine integration of known components, CRUD features, UI polish | Not eligible |
Porting, maintenance, bug fixing | Not eligible |
A failed project that documented real technical locks | Eligible, failure can be good evidence of uncertainty |
The expense lines inside a claim
- Payroll of researchers and technicians for time actually spent on qualifying work, supported by time tracking.
- The 40% operating-cost allowance computed on that payroll.
- Depreciation of equipment used for the research.
- Subcontracted R&&;D, only if the subcontractor holds the CIR agrément delivered by the ministry. Work sent to a non-accredited contractor, including one inside your own group, falls out of the base.
A worked ex&le
Take a subsidiary with eight engineers on qualifying projects, a profile we see constantly. Assume €1.2M of eligible gross payroll for time genuinely spent on R&&;D, €60,000 of depreciation on test equipment, and €150,000 subcontracted to an accredited French lab.
Line | Amount |
Eligible staff costs | €1,200,000 |
Operating-cost allowance at 40% | €480,000 |
Depreciation of research equipment | €60,000 |
Accredited subcontracting | €150,000 |
Total eligible base | €1,890,000 |
CIR at 30% | €567,000 |
Over half a million €s, on a team that exists anyway. Under the pre-2025 rules the same numbers produced €577,800 from the 43% allowance alone, before counting the patent costs that could then pad the base further, which is exactly why claims need rebasing rather than copying. Now the timing: if this entity is group-owned and pays, say, €150,000 of French corporate tax, the credit wipes that bill and leaves €417,000 as a receivable collected three years later. Real money, but arriving later than an unexamined model assumes.
How the CIR stacks with grants and other regimes
- Public subsidies reduce the base. A BPI grant or other public funding received for a project comes out of that project’s eligible spend before the 30% applies. Claiming the CIR on subsidized €s is a classic rectification.
- JEI status attacks a different line. The Jeune Entreprise Innovante regime relieves employer social charges rather than income tax, so a qualifying young company can hold both, JEI lowering the cost of the team while the CIR refunds part of what remains. Group ownership constraints apply there too.
- The CII sits next door for smaller entities. The innovation credit covers prototyping of new products for SMEs at its own rate and caps, worth knowing about, but the SME test excludes most group-owned subsidiaries just as it does for the refund.
The rescrit: certainty in advance
If a project’s eligibility feels arguable, France offers a formal advance ruling, the rescrit CIR. You describe the work to the administration before or alongside the claim, and silence beyond the statutory response window generally counts as acceptance. For a US parent that dislikes booking contingent tax positions, a rescrit converts an estimate into something an auditor signs off without a reserve.
Documentation that survives an audit
The CIR is declarative: you compute it, claim it, and defend it later. The administration can and does ask for the technical file years afterward. What a defensible file contains:
- A per-project technical dossier: state of the art, the uncertainty faced, approaches tried, why outcomes were not predictable. Written during the work, not reconstructed three years later.
- Time tracking that ties named people to named projects. The single most common failure point.
- CVs and qualifications of the team, establishing researcher and technician profiles.
- A clean expense trail from the general ledger to the claim, payroll, depreciation and subcontractor invoices reconciled.
The classic rejection reasons are the mirror image: dossiers written after the fact, “R&&;D” that reads as product development, missing agrément on subcontractors, and time allocations nobody can substantiate.
How it lands on the US side
Three interactions deserve attention in a US group, and all three are fact-specific enough that we flag them rather than settle them here. The US federal research credit targets US-based research, so the same French € does not earn credits twice. The CIR lowers French tax, which feeds through the US rules for foreign income and credits applying to your structure. And transfer pricing decides the economics underneath: if the French entity works cost-plus for the parent, who funds the research and who owns the resu<ing IP shapes both the CIR file and the intercompany agreements. Getting the French claim right while quietly contradicting your transfer pricing documentation is a self-inflicted audit.
From eligibility to cash
Expand CPA is a Franco-American accounting firm with offices in Paris, New York and Tel Aviv. We scope which projects qualify, build the technical and financial file to audit standard, file the claim, and model the cash timeline honestly for group-owned entities, alongside the subsidiary structures and transfer pricing the credit interacts with. If you have engineers in France and no CIR claim, or a claim bui< on the pre-2025 rules, the review is usually worth commissioning.
Frequently Asked Questions
Our French entity is loss-making. Is the CIR still worth claiming?
Yes. The credit does not need taxable profit to exist; it becomes a receivable refunded after three years, or immediately if the entity genuinely qualifies as an EU SME at group level.
Do we need patents for the work to qualify?
No. Patents are neither necessary nor sufficient. Eligibility turns on demonstrated technical uncertainty, and since the 2025 trim patent costs are no longer in the base at all.
Can our US parent invoice the R&&;D to itself and claim the CIR there?
No. The CIR belongs to the French entity bearing eligible French research costs. Routing the work through the parent moves it out of the regime, and subcontracting inside the group only counts with the proper accreditation.
Related Expand CPA guides
- Creating a subsidiary in France: SAS, SARL or branch
- Transfer pricing for French subsidiaries of US groups
- Form 5471 for US owners of a French company
Disclaimer: CIR rates, expense rules and refund conditions are set in the finance laws; the base was trimmed for spend from 15 February 2025 and the regime confirmed for 2026. Figures verified August 2026 against entreprises.gouv.fr and the 2026 finance law commentary. General information, not tax advice.
