France

Foreign tax credit

Under DTTs signed by France, several methods have been established to avoid double taxation. The main one is the imputation of a tax credit from tax effectively paid. However, some treaties establish a tax exemption or the exclusive right to tax. Also, a tax-sparing clause is included in some treaties, which allows for the deduction of not only the tax actually paid but a higher amount of tax.

R&D tax credit

The R&D tax credit is determined based on the eligible R&D expenses incurred during the calendar year (whatever the closing date of the FY).

The R&D tax credit is determined based on R&D projects qualified as eligible due to compliance with criteria set by the French Ministry of Research ( ‘Ministère de l’Enseignement Supérieur, de la Recherche et de l’Innovation’ or MESRI) and is equal to 30% of qualifying R&D expenses, up to EUR 100 million, and 5% above.

For R&D tax credit with respect to 2025 the qualifying expenses are the following:

• Depreciation of assets entirely or partially dedicated to R&D, including patents acquired;
• Staff costs for researchers, Subcontracting expenses paid to public or private subcontractors in the European Economic Area, approved by the French Ministry of Research. These expenses are subject to ceilings;
• 'Operating costs', which are equal to a percentage of R&D tax credit eligible depreciation allowances and R&D tax credit eligible staff costs;
• Standardisation expenses;
• the amounts of subsidies for R&D tax credit eligible R&D projects, to be offset against the eligible expenses.

Technical and financing documentation shall be drafted to be made available for tax audit purposes and in case of questions from the French tax authorities and/or from the French ministry of research.

The tax credit can be offset against the CIT liability payable by the taxpayer with respect to the calendar year during which the wages are paid. Any excess credit can be carried forward and offset against the tax liability of the taxpayer during the next three years.

As a general rule, credits unused after three years will be refunded to the taxpayer. The ‘receivable’ (unused credits) can be transferred or sold only to credit institutions. Finally, special provisions apply in the case of mergers and assimilated restructuring operations.

Research collaboration tax credit

The 2022 Finance Bill introduced a tax credit for collaborative research for eligible expenses incurred between 1 January 2022 and 31 December 2025 within the EU or the EEA as part of collaborative contracts with so called ‘Research and Knowledge Dissemination Organisations’ (ORDC) (i.e. mainly universities). 

An ORDC is considered to be an entity, regardless of its legal status or method of financing, whose primary objective is to carry out, in complete independence, fundamental research, industrial research or experimental development activities or to widely disseminate the results of these activities by means of teaching, publications or knowledge transfer. ORDCs must be approved by the French Ministry of Research. 

The tax credit includes technical and scientific research operations in three areas: fundamental research, applied research, and experimental development. 

The tax credit is equal to 40% (50% for EU small-and medium-sized enterprises [SMEs]) of the expenses invoiced by these organisations, up to a cap of EUR 6 million per year. Expenses invoiced by ORDCs in excess of the EUR 6 million limit may be included in the basis for calculating R&D tax credit. 

The tax credit can be offset against the CIT liability payable by the taxpayer with respect to the calendar year during which the wages are paid. Any excess credit can be carried forward and offset against the tax liability of the taxpayer during the next three years. 

Credits unused after three years will be refunded to the taxpayer. 

New Green industry tax credit (i.e. crédit d'impôt pour l'industrie verte [C3IV])

The 2024 Finance Bill introduced a tax credit for green industry, equal to 20% (or 25% to 40% depending on the geographic area of investment) of the amount of eligible expenses incurred. The tax credit could amount to a maximum of EUR 150 million per company (or EUR 200 million to EUR 350 million in the case of investments in specific geographic areas). 

Eligible investment are expenditures incurred in connection with activities contributing to the production of batteries, solar panels, wind turbines and heat pumps. 

This tax credit applies to investment plans approved by the tax authorities no later than 31 December 2025.

Patent Box regime

Under certain conditions, income derived from the sale or license of patents or patentable inventions, as well as software under restrictive conditions, is taxed at a reduced CIT rate. See the Taxes on corporate income section for more information.

Tax reduction on charitable donations 

The tax reduction amounts to 60% for payments up to EUR 2 million. For payments in excess of this amount the tax reduction is limited to 40%. Payments are taken into account within the annual limit of EUR 20,000 or 5 ‰ of turnover, whichever is higher.

As a counterpart of this tax reduction payments are not tax deductible for calculating the tax result.

The tax reduction on charitable donation can be offset against the CIT liability payable by the taxpayer with respect to the financial year during which the donations were granted. Any excess reduction can be offset against the tax liability of the taxpayer during the next five financial years.

Inbound investment incentives

No particular incentives are available to foreign investors in France. However, French legislation offers a comprehensive programme of various tax incentives and development subsidies to encourage investment mainly in underdeveloped areas (said programs will be subject to authorization or notification to the European Commission).

Capital investment is encouraged through the declining-balance method of depreciation as well as through exceptional depreciation for certain capital expenditures.