Innovation Tax Credit (CII): The Fiscal Boost
Introduction
Are you developing a new product? Good news: the Innovation Tax Credit (CII) can help finance part of your innovation costs.
Less famous than its big brother, the Research Tax Credit (CIR),the CII exclusively reserved for SMEs and can become a real lever to boost your cash flow.
What Exactly Is the Innovation Tax Credit (CII)?
The CII is an extension of the CIR,specifically designed for SMEs that don’t necessarily conduct traditional R&Dbut invest in the development of new products..
It allows you to recover up to 30% of eligible innovation expenses incurred until December 31, 2024.
From 2025, this rate will drop to 20%,as per the Finance Bill (official source: Bercy).
Annual spending cap: 400 000 €
That’s up to €120,000 in tax credit.
Who Can Benefit from the CII?
- The CII is available only to SMEs under the EU definition, meaning you must meet both of these criteria:
- Fewer than 250 employees
- Chiffre d’affaires inférieur à 50 M€ (ou total de bilan < 43 M€)
As with the CIR, you must also be taxedunder the standard or simplified corporate or income tax regime (IS or IR).
More info: Our article on the CIR
What Expenses Are Eligible Under the CII?
- Here are the main categories of eligible expenses:
- Salaries and social contributions of staff involved in the innovation project
- Depreciation of assets used for development (hardware, software, etc.)
- Subcontracting costs, provided the supplier is accredited by the Ministry of Higher Education and Research
- Intellectual property expenses: patent filings, designs, models, and legal defense fees
- Important: The expenses must relate to product innovation—not marketing or organizational innovation. Your product must be new to the market or significantly outperform existing options.
Why the CII Is a Powerful Tool for Your SME
- Because it reduces the cost of innovation. Whether you're building a new software tool, a connected object, or an innovative device, the CII helps you recoup part of your investment. That means:
- Lower development budget
- Faster time-to-market
- Reduced tax burden or improved cash flow (via refund if in deficit)
- In short: a strategic lever to stay competitive without burning your runway.
Watch Out for These Common Pitfalls
- Like the CIR, the CII is a closely monitored tax scheme. Stay sharp:
- Your project must meet specific innovation criteria
- Only certified subcontractors qualify
- Keep precise records: technical drawings, specs, reports, evidence of innovation
- Marketing and sales expenses are excluded
How Flag Can Help
- At Flag, we know the terrain and guide you through every step:
- Equity fundraising
- Non-dilutive financing: Bpifrance, grants, loans, etc.
- Tax optimization (CIR, CII, JEI)
- CFO support (CFO-as-a-Service)
Not sure if you qualify for the CII? Reach out—we’ll evaluate your case, no BS, and see how to claim what’s rightfully yours.
Additional Resource
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