The Administrative Court of Appeal of Versailles, in a decision of 28 May 2020 (No. 18VE03123), sheds light on the notion of the term “entrust” mentioned particularly in Article 244 quater B II d) of the General Tax Code.
In this case, Sanofi-Aventis had outsourced R&D works to SA Genfit, the latter benefiting from an accreditation from the French R&D Ministry. SA Genfit considered that this work was not carried out under a subcontracting contract but under a joint research partnership with joint R&D work. Consequently, according to SA Genfit, the mechanism of deduction of the sums paid by Sanofi-Aventis from the RTC basis of SA Genfit, pursuant to Article 244 quater B III of the General Tax Code, was not applicable.
The Court, agreeing with the administration and reversing the first instance judgment, considers on the contrary that Sanofi-Aventis, according to the contractual terms, did indeed “outsource the performance of precisely defined research operations”, “from the results of which it intended to benefit” and “entrusted the performance thereof to SA Genfit, in return for the payment of contractually determined sums”. According to the Court, the R&D work was therefore “entrusted” within the meaning of the aforementioned article, and the mechanism for neutralizing the sums received by SA Genfit in the basis of its RTC was to apply.
It is interesting to note that the Court made this decision even though the collaboration between the two parties was extensive, with the provider taking risks and participating in the results of the R&D, and even though, according to the Court, “this collaboration could not be qualified as a subcontracting relationship“.
The Court thus seems to confirm, even if the dispute here is at the level of the service provider and not of the principal, that the notion of the term “entrust” within the meaning of the RTC should not be restricted to “subcontracting” contracts strictly speaking, but applies as soon as the above criteria (outsourcing of precisely defined R&D work in consideration for remuneration) are met.