The French tax authorities have issued a tax ruling (BOI-RES-BIC-000154) clarifying the following key points interaction between the tonnage tax system and the research tax credit (CIR).
Prior to this clarification, shipping companies that opted for the tonnage tax regime were excluded from benefiting from the CIR for their research and development (R&D) expenditure. Under the tonnage tax system, taxable profits are determined on a flat-rate basis, based on the tonnage of the ships, irrespective of the actual profits generated by the company's activities. This flat-rate approach did not allow R&D expenditure to be taken into account when calculating taxable profit, an essential condition for benefiting from the CIR..
How to benefit from the CIR when opting for tonnage tax?
The answer provided by the tax authorities allows shipping companies that opt for the tonnage tax system to benefit from the CIR for R&D expenses incurred in operations excluded from this system.
These operations are subject to corporate income tax (IS). under the conditions of ordinary law. This means that only research and development expenditure incurred in connection with activities not covered by tonnage tax, but falling within the scope of other operations subject to corporate income tax, is eligible for the CIR.
Reminder:
For a company to benefit from the CIR, it must meet a number of conditions stipulated in article 244 quater B of the French General Tax Code. These conditions include the inclusion of R&D expenditure in the company's taxable income. It is essential to note that only operations excluded from tonnage tax, but falling within the scope of activities subject to corporate income tax, are eligible.
Conclusion
This favorable response offers a new opportunity for shipping companies to benefit from the CIReven if they have opted for tonnage taxation. By understanding this distinction, these companies can now include in their tax calculation R&D expenditure incurred in activities excluded from tonnage tax.
It is essential for these companies to keep abreast of legislative developments to secure their tax advantages.
Article written by:
Alex PROUVEUR
Tax lawyer - G.A.C. Group
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