RTC on staff seconded by another company: whilst possible in theory, the practical justification is rigorous and evidence based

By a 2017 ruling, the French State Council stated that the expenses of seconded staff carrying out research operations in the company premises and with its resources could be eligible to the French RTC (State Council, January 25, 2017, n°390652, SARL Intuigo also mentioned in an article on our blog).

This principle has recently been applied by the Versailles Administrative Court of Appeal in a decision of the same name. The Court was led to rule on the eligibility to the RTC of the expenses incurred by SARL Intuigo under the title of seconded “de facto manager” (Versailles Administrative Court of Appeal, October 3, 2019, n°17VE02004, SARL Intuigo)*.

It highlighted that neither the secondment agreement nor the other documents provided (invoices, work summary sheets and weekly meeting minutes) mention the nature and details of the services provided by those staff member. In such conditions, it rejected the eligibility of related expenditure. It flowed from this ruling that the elements submitted to the Court did not justify that the seconded staff had carried out R&D operations for the company. This shows a focus shifted to pieces of evidence provided by the tax payer.

This case was then the subject of a cassation complaint before the French Council of State, which was not admitted (French State Council, June 9, 2020, n°436588, SARL Intuigo). The ruling of the Versailles Administrative Court of Appeal is therefore final.

In a second ruling, the Versailles Administrative Court of Appeal resumed the decision of the State Council’s criteria to assess the eligibility of expenses related to the secondment by a parent company to its subsidiary of two staff members holding the positions of manager and sales manager (Versailles Administrative Court of Appeal, November 7, 2019, n°18VE00740, SARL Biscuiterie de la Côte d’Opale). Thus, it ruled against the eligibility of this expenditure after considering that:

  • the availability agreement did not stipulate that these personnel “carry out research operations on the premises and with the resources” of the subsidiary
  • the information produced did not show that the staff members had acquired an engineering qualification

* Procedural clarification: in addition to the refusal to reimburse its 2007 RTC, which had led it to the French Council of State, SARL Intuigo has contested before the Versailles Administrative Court of Appeal the reconsideration of its 2006, 2007 and 2008 RTCs following a tax audit.

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 […]

Marion Oliviero

Graduated from the Master « Fiscalité appliquée » of UPEC and lawyer, Marion developed skills related to corporate tax and I am more particularly involved in R&D tax by means […]