The Collection Tax Credit (CIC): Financing for the Textile Industry

Learn all about the tax credit for the textile, apparel, and leather sector: a key initiative that supports research and innovation in the creation of new collections.

Understanding the Collection Tax Credit (CIC)

The Collection Tax Credit (CIC) is a tax incentive specifically designed to support industrial companies in the textile, apparel, and leather sector with regard to expenses related to the development of new product collections in this sector. This measure aims to stimulate innovation in these traditional industries by recognizing the importance of regularly updating product lines to maintain competitiveness in the market.

Dedicated to the new collections

The collection tax credit specifically targets expenses associated with the development of new product collections in the textile, apparel, and leather sector. The development of a new product line must take place at regular intervals that are known in advance, in accordance with industry practices.

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To be considered new, collections must clearly distinguish themselves from previous ones through the use of new materials, designs, shapes, or colors. This creative process and eligible activities include the search for new ideas, as well as the design and production of prototypes or unsold samples. The goal is to encourage companies to invest in high-value-added activities that lead to innovation and the renewal of their product offerings.

The Benefits of the Tax Credit for Companies in the Textile, Apparel, and Leather Sector

The CIC offers numerous benefits to eligible companies, enabling them to maximize their innovation potential while reducing their production costs:

• Reducing R&D costs: The Collection Tax Credit can supplement certain R&D activities eligible for the Research Tax Credit (CIR) based on the expenses incurred and for eligible companies.
• Promoting innovation: It encourages companies to step up their efforts to introduce new product lines in the targeted textile, apparel, and leather sector.
• Improving competitiveness: The Collection Tax Credit helps businesses stand out from their competitors.
• Supporting growth: Businesses can explore new markets, attract a broader customer base, and drive economic growth.
• Financial flexibility: It offers companies greater flexibility in managing their development budget, allowing them to allocate additional resources to other strategic projects.

Eligibility and Application Process

Eligible companies

Industrial companies eligible for the collection tax credit are those in the textile, apparel, and leather sector (NAF codes beginning with 13, 14, or 15) that develop new collections.

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Industrial companies that outsource their manufacturing may also be eligible for the tax credit, provided that they own the raw materials and assume all the risks associated with manufacturing and marketing.

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This therefore does not apply to companies in the textile, apparel, and leather sector that do not engage in any production activities (design studios, companies that create new collections but outsource manufacturing to other companies, etc.).

Eligible activities

Eligible activities involve the development of new collections that differ from previous ones in terms of materials, designs, shapes, or colors. These collections must be updated at regular intervals that are known in advance.

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If the product line is updated outside of a regular schedule, the company is not eligible for the program.

Eligible expenses

1. Personnel expenses, including salaries and payroll taxes, for designers and technicians in design departments who are directly and exclusively responsible for designing new products, as well as for engineers and production technicians responsible for producing prototypes or unsold samples.

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2.Depreciation expense for new fixed assets—whether created or acquired—that are directly used in the production of prototypes or unsold samples of new products.

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3. Operating expenses, set at a flat rate of 75% of total personnel expenses.

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4. Costs associated with the filing and defense of designs, up to €60,000 per year.

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5. Expenses related to the development of new collections entrusted to external designers or design firms that have been approved.

Calculation and amount

1. Thecalculation rate for the grant is 30% of the total eligible expenses.

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2.The aid scheme is subject to compliance with the EU de minimis regulation, which caps the total amount of de minimis aid received by a company at €300,000* over a period of three fiscal years.

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This rule regarding the cap on “de minimis” aid takes effect on January 1, 2024, and remains in effect through December 31, 2030. Prior to 2024, the cap on such aid was €200,000. It is essential to understand this rule and incorporate it into your tax and financial strategy.

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Note: As of now, the collection tax credit applies to expenses incurred through December 31, 2024. Whether or not the program is extended will depend on the next budget bill.

Option for a ruling

Businesses may submit a request to the tax authorities to obtain a formal ruling on whether their activities qualify for a tax reduction through the tax ruling procedure. The ruling issued (a lack of response within three months is deemed tacit approval) is binding on the tax authorities and limits their right to apply the ruling retroactively.

Justification Document

It is necessary to prepare a supporting documentation package to demonstrate the company’s eligibility, the work performed, and the expenses claimed.

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This supporting documentation must demonstrate that the company and its activities meet the program’s requirements. It must include references to various materials that illustrate the process of developing new product collections in the relevant sector. It may consist of trend boards, design and style research, prototypes, and, where applicable, finished products.

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Work carried out in year N pertains to collections released in years N+1 and N+1.5 (for example: work in 2021 for the Spring-Summer (SS) 2022 and Fall-Winter (FW) 2023 collections)

Trends Section

In this section, it is recommended that you document everything related to color palettes and seasonal design trends. You may also include collection inspirations, if applicable—for example, inspiration drawn from an animal, a plant, etc.

Research Section

In this section, you should cover everything related to research on the design and colors of the product in question. The materials may include sketches, design tests (such as color or material tests), as well as graphic elements (for example, print-ready designs).

Prototype Section

In this section of the supporting documentation for the Collection Tax Credit, you will review all items related to or resulting from the process of designing and producing prototypes or unsold samples: fabric scraps, pattern tests, fittings on mannequins, alterations, design sketches, etc.

Conclusion

The Collection Tax Credit (CIC) is a valuable initiative designed to stimulate innovation and strengthen competitiveness in the textile, apparel, and leather industries. Indeed, in a context of increasingly intense global competition and growing demand for quality and originality from discerning consumers, the CIC encourages investment in the creation of unique and memorable collections. By reducing the costs associated with creating new collections, the program encourages companies to innovate and stand out. The steps to qualify for this credit are clearly defined, providing certainty and clarity to eligible companies.

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This tax incentive is not only a source of financial support; it also serves as a catalyst for innovation, encouraging companies to explore new ideas and gain a competitive edge in the market. In short, the Collection Tax Credit is an indispensable tool for companies in the textile, apparel, and leather goods sector that wish to invest in the future and accelerate their growth in a competitive environment.

Dynergie, a consulting firm that helps you obtain your Collection Tax Credit (CIC)

We are Dynergie, and we assist companies seeking to obtain the Collection Tax Credit. If you would like to benefit from the expertise of our team of experts, please contact us via our contact page.

FAQ

How can I tell if I'm eligible for the CIC while already receiving the CII?

While each tax credit funds distinct expenses, the Collection Tax Credit (CIC) and the Innovation Tax Credit (CII) can coexist. For example, the CII will fund innovation, and the CIC will fund the creation of new collections (this is also the case for the Research Tax Credit regarding R&D).

What other tax credits are available for research and innovation?

Other tax incentives designed to encourage research and innovation include the Research Tax Credit (CIR) and the Innovation Tax Credit (CII).

Who is eligible for the research tax credit (CIR)?

The Research Tax Credit (CIR) is intended for companies that incur research and development (R&D) expenses in France. Eligibility criteria include:

• All industrial, commercial, or agricultural businesses, regardless of their size, legal status (corporation, sole proprietorship), and tax regime (subject to income tax or corporate tax).
• Companies that invest in basic research, applied research, or experimental development. The scope of activities eligible for the CIR must clearly demonstrate compliance with five cumulative criteria: novelty, creativity, uncertainty, systematization, and reproducibility.
• Eligible expenses include salaries, operating expenses, depreciation and amortization, research expenses incurred through CIR-certified third parties, intellectual property expenses, etc.

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Note: For R&D work conducted as part of research collaborations with accredited research and knowledge dissemination organizations, a new incentive has been available to companies since 2022: the Research Collaboration Tax Credit (CICO or CRC).

Who is eligible for the Innovation Tax Credit (CII)?

The Innovation Tax Credit (CII) is available to:

• SMEs as defined by the European Union that incur innovation expenses for the design of prototypes or pilot facilities for new products.
• Companies must be subject to corporate income tax or income tax in France.
• The scope of eligible activities must meet two cumulative conditions: (i) the new product must not yet be on the market; (ii) it must demonstrate superior performance compared to products already on the market in terms of technical specifications, eco-design, ergonomics, or functionality.

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In effect since 2013, the CII applies to expenses incurred through December 31, 2024. Whether or not it is extended will depend on the next budget bill.

What changes are coming to the CIR?

You can find a full article on the CIR reform here.

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Dynergie continuously monitors changes to the various programs.

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Feel free to follow our news for more information.