French innovation tax credit (CII) for software: what really qualifies in 2026

A software project in France can qualify for the innovation tax credit (CII, crédit d'impôt innovation), worth 20% of eligible costs in mainland France, when it designs the prototype of a product that is new to its market and measurably better than what already exists. It can qualify for the research tax credit (CIR, crédit d'impôt recherche), worth 30%, when it tackles a genuine technical uncertainty with a documented research approach. In both cases, building an application, even a hard one, is not enough on its own. Internal tools and client-specific custom builds generally qualify for neither.

This guide is for founders and finance leads, often from outside France, who run or are setting up a software company with a French entity. It reflects official texts and tax doctrine as of 7 November 2026. It is not tax advice: have a French chartered accountant (expert-comptable) or tax lawyer review your case before a credit goes into a funding plan.

Official sources, and why dates matter

The rules change almost every year, and much of what circulates in English is out of date. The references:

• Article 244 quater B of the French General Tax Code, version in force since 1 January 2026, amended by the 2026 Finance Act (Law 2026-103 of 19 February 2026);
• the tax administration doctrine on the CII, BOI-BIC-RICI-10-10-45, published 13 August 2025;
• the 2025 CIR guide from the French research ministry, with a section on computing and an appendix on the CII;
• the government fact sheets on the CII (checked 20 February 2026) and the CIR.

The most common error: quoting a 30% CII. That was the rate before 1 January 2025. The 2025 Finance Act cut it to 20% and extended the scheme to 31 December 2027.

CII and CIR at a glance

The EU SME definition means fewer than 250 employees, and turnover up to 50 million euros or a balance sheet up to 43 million euros. For a French subsidiary of a foreign group, this is where most claims fail: if a parent holds 50% or more, the group's figures are added in full, and stakes of 25% or more are added proportionally.

The CII applied to software

The decisive test: new to the market

The tax code and the doctrine define a new product as a tangible or intangible asset, which includes software, meeting two conditions:

1. it is not yet on the market;
2. it outperforms existing products on technical performance, eco-design, ergonomics or functionality.

The research ministry's guide explains how the administration reads this:

• novelty is judged against the market, not against your company. A product already offered by others in the same competitive space is not new;
• the benchmark is the existing offer when the work starts;
• the improvement must be significant;
• customised or made-to-order production, minor additions and updates do not create new products;
• only product innovation counts. When a product innovation sits inside a service innovation, only the product part is eligible.

For a SaaS company, that last point matters: the software can be the new product, but service operations, support or the business model are outside the base.

Likely readings by project type

The eligible phase: designing the prototype

The CII funds design of the prototype, not production or marketing. Eligible activities include design, configuration and engineering, testing and evaluation, and acquiring knowledge or technology needed for the prototype. Market studies, training, marketing and buying competitor products are excluded.

For software, our reading of the texts is that the line usually falls at the commercial release of the first version. Work on a product already on sale is no longer design of something "not yet on the market", unless it creates a distinct new product. Have this point confirmed for your case.

Eligible costs

Under paragraph k of Article 244 quater B and the guide's appendix:

• staff costs for people directly and exclusively assigned to the prototype, which means time records you can defend;
• depreciation of assets used directly for that work;
• patent, design and model costs linked to it;
• work outsourced to approved companies or engineering firms.

The guide notes that the flat-rate operating cost allowance no longer applies to the CII after the 2022 tax year. All costs share one cap of 400,000 euros per year, however many prototypes you build, and any public grant received for the same work is deducted.

Worked example, fictional: a mainland French SME assigns two developers, with a total loaded cost of 150,000 euros, to designing an eligible product during the year. It claims 150,000 euros of costs, and the CII is 20% of that, so 30,000 euros, provided no grant funded the same work.

Your vendor must be approved

This is the point founders discover too late. An agency, studio or freelancer invoice only counts toward the CII if the vendor holds a CII approval (agrément CII), managed nationally by the Île-de-France regional labour and economy directorate (DRIEETS), according to the guide. Ask for the approval decision, its scope and its validity dates before signing. Without it, only your in-house costs can count.

Our guide on funding custom software development places the CII alongside grants, loans and subscription models.

The CIR applied to software

The CIR is more generous and harder to obtain. The 2025 guide says software research must start from a problem with no obvious solution in the state of the art, handled through a documented approach. It states plainly that developing software, an application or a new feature, without an explicit research approach, is not eligible.

The guide lists traps worth knowing:

• novelty is not research: all software is unique, but only solving a new technical problem creates knowledge;
• complexity is not a criterion: a large, difficult project is not research for that reason;
• learning a technology does not count;
• a prototype is not enough on its own: it must validate a research concept;
• agile iterations that fix defects or meet specifications are generally not R&D.

On the numbers, the tax code adds a 40% flat-rate operating allowance on research staff costs, and caps work outsourced to approved bodies at 2 million euros a year (10 million euros without a dependency link). The doubling of costs for recently hired PhD holders only applies to costs incurred before 15 February 2025, according to the guide.

Combining the CII, the CIR and JEI status

• CIR and CII on one project: possible on separate phases. The guide notes that R&D phases can sit between innovation activities, for example when innovation hits a technical uncertainty. The same cost never goes into both bases.
• With Young Innovative Company status: the 20% research-spending ratio for JEI status is computed on CIR costs, not CII costs. See our guide to French JEI status for software startups.
• With grants: public aid received for the same work is deducted from the base.

Filing, refunds and advance rulings

Filing. Both credits are claimed on form 2069-A-SD with the annual tax return; for a company subject to corporate tax, by the 15th day of the fourth month after year-end. The credit is computed on the calendar year, whatever your fiscal year.

Refunds. The credit is offset against corporate tax; any balance is carried forward three years, then refunded. According to the government CII fact sheet, an immediate refund is open to companies less than two years old, young innovative companies and companies in insolvency or conciliation proceedings, requested with form 2573-SD (the CIR guide mentions it too). For a loss-making software startup, this is what turns the credit into cash. Have your accountant check the rules for other SMEs. A refund request may trigger a document review.

Advance ruling. A rescrit asks the tax administration whether a project qualifies, one project per request, at least six months before the filing deadline. The administration has three months to answer; silence counts as approval. For the CII, it consults the DRIEETS on the innovation criteria. The ruling covers eligibility, not the amounts.

Audits. Claims can be audited within three years of filing, with experts from the research ministry for the CIR or the DRIEETS for the CII.

What to document from day one

1. The market at kick-off: competing products, their features and limits, dated. This is your novelty benchmark.
2. Target performance, in measurable terms: processing time, steps for the user, capabilities nobody offers.
3. Time records per person and per project, kept as you go.
4. Versions and experiments: what was tried, measured, dropped.
5. Vendor contracts and approvals.
6. The commercial release date, which closes the design phase.

Rebuilding this evidence during an audit is far harder than keeping it during the project.

Common mistakes

• Using the old 30% CII rate.
• Claiming an internal tool as a new product.
• Confusing new to us with new to the market.
• Counting invoices from an unapproved vendor.
• Failing the SME test because of the parent group.
• Claiming costs incurred after commercial release.
• Building the budget on the credit before checking eligibility and refund timing.

What this means for your project

A tax credit arrives after you spend, and only if the project fits strict criteria. It improves the economics of a genuinely innovative product; it should not drive your architecture or your timeline. Start by proving the product solves a real problem on a controlled budget: our article on the cost to build a SaaS platform gives orders of magnitude, and our comparison of prototype, MVP and proof of concept helps pick the right first step.

If you outsource development, check before signing whether your vendor is approved, and how rights in the work are allocated, which is defined case by case in the contract (see who owns custom software source code). And if you want to judge the product before building a tax file, our free prototype, presented on a video call before any commitment, shows you the application before you spend anything.