Nature of the work eligible to the Research Tax Credit (RTC) for the principal: eligibility of analytical studies and tests entrusted to a subcontractor called into question even if they were necessary to achieve research work

The National Federation of Seed Multiplier Farmers (FNAMS) subcontracted analytical studies and tests and included the corresponding expenses in its RTC basis.

The Court considered that the subcontracted work could not be regarded as genuine “clearly individualised” research and development operations, even though they were essential to the success of FNAMS’ research work.

This decision validates an increasingly frequent administrative practice during controls, consisting in refusing the eligibility of work carried out by subcontractors on behalf of third parties, on the basis that they do not in themselves constitute R&D operations.

It must be noted that if the work in question were carried out by the ordering company itself, it would be seen as eligible, and considered as a part of the research project as a whole. This principle was accepted by the Administrative Court of Appeal of Nancy, which adopted a solution opposite to the Court of Versailles in the FNAMS judgment (Administrative Court of Appeal of Nancy, 23/03/2017, n° 16NC00198, SARL Biotek Agriculture).

In the presence of contradictory caselaw handed down by trial judges, it will be necessary to wait for the French State Council to clarify the matter when it is referred to it.

Lucille Chabanel

Lucille has more than 14 years’ experience in tax law. She is a member of the corporate tax department since 2002 and joined the R&D group in 2004. She has […]