French Research Tax Credit (“Crédit d’Impôt Recherche”) – Decision of the French Administrative Supreme Court on September 9, 2020


Tax eAlert

By a decision of September 9, 2020 (No. 440523, 8th and 3rd chambers combined), the French Administrative Supreme Court ruled on the reading of Article 244 quater B III of the French General Tax Code (FTC) and on the interpretation given to it by the french tax authorities in their comments published on April 4, 2014 under the reference BOI-BIC-RICI-10-10-20-30 (§220, second paragraph).

As a reminder, it follows from the provisions of Article 244 quater B II d bis of the FTC that the amounts paid to private research organizations approved by the Ministry of Research for carrying out research operations entrusted to them are part of the research expenses to be included in the scope of the FRTC.

Since approved private organizations may also carry out research operations independently of the operations that are subcontracted to them, Article 244 quater B III of the FTC provides that, in this case, these organizations must deduct from their own FRTC’s calculation basis the amounts received from the principals.

The main input of the decision of September 9, 2020 lies in the interpretation given to Article 244 quater B III by the French Administrative Supreme Court: it states that this provision is limited to prohibiting approved private research organizations from including in the scope of their FRTC the expenses incurred to carry out research operations entrusted to them by third parties.

To remove any ambiguity, the Supreme Court adds that this provision cannot be read as requiring these organizations to deduct the fraction of the amounts invoiced to the principals from the calculation basis of their FRTC. Therefore, this welcome clarification leads to exclude from the sums to be deducted from the calculation basis the margin realized by the approved subcontractors on the expenses relating to research operations reinvoiced to their principals.

The French Administrative Supreme Court concludes that the aforementioned administrative comments are vitiated by a lack of jurisdiction on the part of the french tax authorities, and that the applicant company is therefore entitled to request their annulment.

This decision is particularly interesting in two respects.

On the one hand, one will remember the numerous requests filed with the Ministry of Research by private organizations to have their approval revoked, following the publication of the above-mentioned administrative comments. This decision could have the opposite effect and lead to a reconsideration on whether or not to apply for approval.

On the other hand, for organizations that have maintained their approval, this decision could be an opportunity to file claims in order to revise the deduction of the sums invoiced in the FRTC that they have declared.



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Rémi Montredon

Rémi Montredon

Avocat, Associé, PwC Société d'Avocats

Amelia Suc

Amelia Suc

Avocat, Senior Manager, PwC Société d'Avocats

Jordan Khamsitthideth

Jordan Khamsitthideth

Avocat, Directeur, PwC Société d'Avocats