The Paris Administrative Court of Appeal (CAA de PARIS, 9th chamber, 24/01/2025, 23PA02531) has issued a decision concerning eligibility of expenditure on engineering services provided by an approved subcontractor (ASSYSTEM company, hereafter AFR).
In this case, the tax authorities challenged the eligibility of the Research tax credit (CIR) of R&D expenditure declared by an approved subcontractor, arguing that it fell within the scope of research subcontracting on behalf of principals, while the subcontractor argued that it should be included in its own tax credit.
The court seized has the service provider was vindicated, since the subcontracting contracts were for global engineering services, not for outsourced research assignments.
Consequently, R&D expenditure incurred by the service provider on its own behalf was eligible for its own CIR.
What criteria led to this decision on the eligibility of expenditure for the CIR?
The judges based their decision on a number of clues:
Nature of contracts signed with principals
- The contracts defined specific engineering and development servicesnot outsourced research missions.
- The commitments included a performance obligationThis is incompatible with a pure R&D service.
Detailed, structured specifications
- The services were precisely described in a clear specificationsdividing the project into well-defined lots.
- A detailed provisional schedule accompanied these services, with deadlines and penalties for late delivery in the event of non-compliance.
No transfer of R&D to customers
- If the contracts provided for a transfer of intellectual propertyit did not carry than on the final deliverablesand not on the underlying research.
- This shows that the subcontractor was carrying out its own R&D work, independently of the orders placed.
Expert opinion
- Experts from the French Ministry of Higher Education and Research have validated thetechnical eligibility R&D work carried out by AFR.
- The tax authorities have never questioned this eligibility during any of their audits.
No double counting in the CIR for principals
- AFR's corporate customers have not included these expenses in their own CIRThis confirms that they did not consider them as outsourced research.
Administration fails to demonstrate rebilling
- No evidence has been provided that the R&D expenditure incurred by AFR would have been rebilled to customers and deducted twice.
What was the judge's final decision?
- Validation of AFR's CIR R&D expenses incurred by AFR on its own behalf remain the property of AFR. eligible in its own tax credit.
- Rejection of the administration's position : The services provided did indeed fall within the scope of a global engineering servicesand not research subcontracting within the meaning of the CIR.
In conclusion, this decision is interesting in that it provides clues for distinguish a research service provided for a principal from an engineering service eligible for the CIR of the "subcontractor", even if the latter is approved.
Would you like to know more about the CIR eligibility of your R&D services or subcontracted work?
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