New provisions concerning the tax credit for crafts professions
The tax credit for crafts professions concerning companies with the EPV (Entreprises du Patrimoine Vivant) label (whether crafts or not) was renewed to 31 December 2016, but has been rearranged given certain difficulties in applying it due to the interpretation of the notion of “new product design”. This system now applies to expenses incurred by the company for creating unique items produced in a single specimen or in a small series.
- The tax credit applies to
expenses for the creation of unique items produced in a single specimen or
in a small series, defined by two cumulative criteria:
• Items backed up by plans, models, prototypes, tests or manual development specific to the item;
• Items produced in a single specimen or in a small series not found identically in the company’s previous productions (notably in terms of its shape, functions, the materials comprising it or its lines – these criteria are not cumulative).
- Small series means the production of several dozen units (see examples given in the tax instructions)
The notion of "new product" is not relevant.
- Eligible expenses:
• Salaries and social contributions related to employees directly assigned to the creation of the items produced in a single specimen or in a small series;
• Depreciation of tangible assets created or acquired new which are directly assigned to the creation of the aforementioned items and to the production of prototypes;
• Filing fees for drawings and models relative to the items produced in a single specimen or in a small series;
• Legal defence fees for drawings and models within a limit of 60,000 euros a year;
• Expenses related to the elaboration of items produced in a single specimen or in a small series entrusted by these companies to external stylists or styling agencies.
Operating expenses included in the tax base and previously set at a flat rate of 75% of personnel expenses are no longer eligible.
- The rate remains at 15% for all companies with the EPV label (whether crafts or not; the tax instructions indicate that EPVs need not work exclusively in craft professions).
- Ceiling: €30,000 a year per company (instead of €200,000 over 3 years)
- Only activities concerning the production of tangible property assets are eligible. Services (such as restoring works of art or built heritage) are not eligible.
- The eligible amount of personnel expenses is calculated on a pro rata basis if the employee in question exercises other functions than those related to the creation.
- For managers, only compensation that can be considered a salary by nature may be taken into account.
- The tax credit can only be combined with another tax credit if the same expenses are not taken into account twice.
In other words, the CIMA (tax credit for crafts professions) can be cumulated with the CICE if the two tax credits are calculated on different tax bases:
1) firstly, calculation of the CIMA on eligible expenses;
2) secondly, calculation of the CICE on a tax base excluding expenses included in the CIMA tax base.
- Possibility of using a tax exemption procedure.
- Period of limitation: 3 years after the date on which the tax credit application is filed.
NB: it should be pointed out that if the company’s accounts show losses during an audit, the tax inspector can go all the way back to the origin of the losses. Thus, if there are losses going back more than three years and the inspector considers that a tax credit paid out (also more than three years back) requires a tax adjustment, the tax credits granted and received more than three years earlier may be subject to a reversal.
For detailed information, see the tax instructions.
For all questions on this subject, you can contact your accountant and your local tax centre.