October 2022 | JURISPRUDENCE - personnel costs and doctoral student in law
The Conseil d'Etat has ruled on the eligibility of legal research carried out by a doctoral student in a law firm. The judges confirm that, as a matter of principle, legal research is not excluded from the scheme. However, in this case, the work carried out by the doctoral student did not meet the eligibility conditions.
In this case, the applicant company, which operates as a lawyer, was seeking repayment of its CIR corresponding to personnel expenses incurred in respect of an employee working on a doctorate in law, who had carried out dissertation research on the particularities of divorce proceedings.
The Conseil d'Etat relies on articles 244 quater B of the CGI and 49 septies G, which specify "Research tax credits are available for personnel expenses relating to researchers and research technicians directly and exclusively assigned to carrying out scientific and technical research. Research carried out in the field of law is not in principle excluded, legal research carried out by an employee of a law firm, the purpose of which is to identify applicable legal provisions and analyze existing legal practice in a given field, is not eligible for this tax credit in respect of related personnel expenses. In ruling that the personnel expenses incurred by an employee holding a doctorate in law, carrying out thesis research on the particularities of divorce proceedings within the applicant company, could not give rise to entitlement to the research tax credit, the Bordeaux Administrative Court of Appeal, whose ruling is sufficiently reasoned on this point, did not commit an error of law or give the facts set out an erroneous legal characterization."
The judges at the Conseil d'Etat confirmed that, as a matter of principle, legal research is not excluded from the scheme. On the other hand, the personnel expenses incurred by a doctoral student in law carrying out her thesis research on divorce proceedings do not meet the eligibility conditions for inclusion in the CIR base.
This ruling demonstrates once again the requirement of judges regarding "scientific and technical" sciences. It confirms the decisions n°12PA05A44 and 13 PA O1264 of the Administrative Court of Appeal of Paris of November 2014 which had judged ineligible the activities related to research of a legal nature carried out by a doctoral student in law.
Source: Conseil d'État, 3rd - 8th joint chambers, 14/10/2022, 443869
May 2021 | JURISPRUDENCE - Recognition by the Council of State of the eligibility of a former contribution, as well as of the non-research personnel involved in the expenditure item of technology watch
In a judgment of May 19, 2021, the Council of State first ruled on the application of a flat rate to research staff by the tax administration, as well as on the eligibility of the former CET contribution, and on the eligibility of personnel who do not have the status of researcher involved in technology watch.
The Conseil d'Etat's decision highlights Publicis's failure to justify its employees' research assignment rates. In fact, the tables showing the breakdown of working hours were not detailed enough, and therefore did not allow us to assess whether all the tasks carried out by the employees actually contributed to the performance of research operations.
Thus, the Council of State did not question the rate cap at 85% applied by the tax administration.
The Council of State also ruled on the possibility of valuing the “internal” time of non-research workers in the expense item of technology watch. Indeed, the judges considered that the internal time of non-research staff spent on technology watch could be valued as research tax credit in the expense item relating to technology watch.
Finally, the Council of State considered that the temporary exceptional contribution (which no longer exists since January 1, 2019), was eligible for the research tax credit. This position of the judges is in contradiction with administrative doctrine.
Conversely, the judges confirm that the FNAL and APEC contributions are not eligible for the research tax credit.
Source: Conseil d'État, 9th - 10th joint chambers, 19/05/2021, 432370, Publicis
April 2021 | JURISPRUDENCE - Necessity to bring elements of implication of the personnel, the only production of a follow-up of time is not sufficient
In a judgment of April 13, 2021, the Paris Administrative Court of Appeal ruled on the need to produce sufficiently detailed implication elements.
In this case, the company had a time tracking system in which the number of hours declared by its employees was detailed. The time tracker included hours declared as eligible for the CIR, as well as hours invoiced to the company's customers in their own name. However, the tax authorities noted that, for certain projects, the cumulative quantities of work declared for the research tax credit and those invoiced for other unrelated projects were not compatible with the annual workload of these employees. The tax authorities therefore took the view that, despite the existence of a time tracking system, the company merely produced tables showing the research hours per employee and per project initially declared.
The Administrative Court of Appeal agreed with the tax authorities, ruling that they were justified in excluding the corresponding expenses from the basis eligible for the research tax credit. The company was criticized for failing to provide supporting evidence of the work carried out.
Source: CAA de PARIS, 7th room, 04/13/2021, 19PA02410, Société Criatys Consulting
February 2021 | JURISPRUDENCE - Reminder: Eligibility of research technicians with regard to the application of the definition
In a judgment of February 24, 2021, the Council of State confirms that research technicians can be valued in the CIR for companies, regardless of their training.
As a reminder, to promote a research technician, it is necessary to verify the combination of two cumulative conditions:
• The first condition is that the technician must be in close collaboration with the researcher and under his control, performing tasks necessary for the execution of R&D projects.
- The second condition is that they must be essential to the smooth running of the research and development work, thanks to their technical expertise, experience or practical know-how.
In this case, and before any decision by the Conseil d'Etat, the Administrative Court of Appeal emphasized that the applicant company had not established the existence of a collaborative relationship between each of the employees hired as technicians and a researcher "with a view to providing the technical support essential to the research work".
As it was unable to establish a relationship with researchers, the Court ruled that this staff could not be qualified as eligible within the meaning of the CIR.
Thus, the Court of Appeal, in its decision, reiterates the importance of justifying the expenses incurred.
However, the company appealed to the French Supreme Court, and the Conseil d'Etat ruled that, in fact, the rejected staff were under the authority of the technical director responsible for the research work, who was validated as eligible for the CIR by the authorities.
The Council of State then comes back to the principle being that "can be qualified as research technicians the employees who carry out the operations necessary for the research work eligible for the CIR, under the guidance of one or more researchers who supervise them, and when even they would not have a diploma or a professional qualification in the scientific field ”.
In this judgment, the demonstration of the hierarchical connection between researchers and technicians was essential to admit the eligibility of the technical staff questioned.
Source: CE, February 24, 2021, 429222
December 2021 | JURISPRUDENCE - Correlation between the technical file and the number of hours valued
In a judgment of December 24, 2020, the Paris Administrative Court of Appeal ruled on the assessment of the qualification of rigor and sufficient precision in establishing the number of hours valued, in the absence of a basis pointing.
In this case, the Ministry of Higher Education, Research and Innovation, had validated, during an expertise commissioned during an audit, the number of hours allocated. The tax administration continued to argue that the methods of calculating staff costs were not justified, and thus rectified the company in question.
The Administrative Court of Appeal ruled that when the [AM2] description of all the research operations carried out provide sufficiently precise evidence that the remuneration claimed by the company was actually paid in connection with research operations and is eligible for the tax credit under b) of II of article 244 quater B of the French General Tax Code.
In other words, a company's description of all the research operations carried out, showing the complexity and volume of the research operations undertaken, provides sufficiently precise evidence that the remuneration claimed by the company was actually paid in connection with research operations.
Source: CAA de PARIS, 5th chamber, 12/24/2020, 19PA00143
November 2020 | JURISPRUDENCE - Eligibility of the provision of services via an agency agreement - November 2020
The Nantes Administrative Court of Appeal ruled on the eligibility of expenditure on staff made available when the formalism is not respected.
In this case, the managing director of one company was placed at the disposal of another company under an agency agreement. The Court noted that the tax authorities had in no way called into question the eligibility for the research tax credit of the expenses corresponding to the hours devoted by this person to research operations during the period under review.
The Court then ruled that "the fact that this staff worked for the company under an agency contract, and not under a staff supply agreement, has no bearing on the eligibility of these expenses for the tax credit".
Thus, the Court validates the eligibility of a provision scheme through a mandate contract.
Source: CAA Nantes, 1st chamber, November 5, 2020, n ° 19NT00453
November 2020 | JURISPRUDENCE - Eligibility of the provision providing for the application of a billing with margin
The Nancy Administrative Court of Appeal ruled on the eligibility of personnel expenses made available when the formalism is not respected.
In this case, a company had invoiced its subsidiary the sums relating to the provision of research staff and had declared the amounts in its own research tax credit declaration. It therefore turns out that it was not this company that had carried out the research work, as its research staff had indeed been made available. It was therefore not entitled to claim the benefit of the CIR on these expenses which it also invoiced to the subsidiary company.
However, the Court also ruled on the eligibility of expenditure for provision within the subsidiary, when the amount invoiced included a margin. In this regard, the Court ruled that the expenditure relating to the staff made available was eligible with the daughter company, when this mechanism was implemented through an assistance agreement and the amount declared under the CIR excluded any margin that could have been billed by the company providing this staff.
Source: CAA Nancy, 2nd chamber, November 12, 2020, 19NC01780
November 2019 | JURISPRUDENCE - Involvement of an employee in an R&D project
The Paris Administrative Court of Appeal ruled on the valuation of people without an engineering degree.
In this case, the administration had rejected the personnel costs relating to certain employees, on the grounds that the company had not provided details on “the active participation of this employee in research operations”. It was recalled that the provisions of articles 244 quater B and 49 septies G of appendix I of the CGI, allow for the benefit of the tax credit, personnel expenses that can be assimilated to engineers involved in research. .
The Court ruled that the mere production of the presentation of the research and development activity, the diploma and the salary slip, did not make it possible to establish "either that she has developed skills in the field of research and development, or that she has effectively participated in the company's research and development activities, either directly, or in the form of close collaboration with researchers to provide the technical support essential to the research work within the meaning of the aforementioned article 49 septies G".
In addition, the Court supported the fact that a company could not rely solely on the part of the expert's report, nor on the general distribution of the hours of its employees. This report did not establish that the employee concerned could be regarded as directly assigned to research or development.
Source: CAA Paris, November 27, 2019, N ° 18PA03084
November 2018 | JURISPRUDENCE - Exclusion from the R&D rate cap
The Administrative Court of Versailles ruled that the administration cannot apply, in the absence of a legal provision allowing it, a discount of 5% on salaries paid to personnel assigned exclusively to research, even if a fraction of their working time would be devoted to training, holding information and follow-up meetings and drafting reports.
By way of clarification, in the present case, the company has provided sufficiently convincing evidence demonstrating that its staff is indeed exclusively dedicated to research work. In particular, the company presented a contract and invoices from an external service provider who was responsible for administrative, accounting, tax, legal and financial tasks. Thus, the judges considered that the company had sufficiently justified that these various tasks were not carried out by the employees assigned to research.
Source: CAA Versailles of 11/27/2018, n ° 17VE00189
April 2018 | JURISPRUDENCE - Involvement of a staff in an R&D project
The tax administration contested the taking into account for the calculation of these tax credits of the remuneration of an employee, considering that he did not have the quality of researcher or research technician and did not have the required diplomas. in the scientific field; and that the company did not provide proof that he had been directly and exclusively assigned to research operations and that he had acquired within the company skills which assimilated it, by the level and nature of the activities, engineers involved in research work.
The judges of the Administrative Court of Appeal of Lyon confirmed the exclusion of the remuneration of the contested employee retained for the calculation of the research tax credit on the grounds that the elements presented by the company such as the employment contract, the copies assignment timesheets, copies of project presentation brochures as well as a dated and signed study protocol presenting the said employee as the person in charge of a project as well as "the support he brings", do not do not allow it to be established that he has developed skills in the field of research and development and that he has also effectively participated in the company's research and development activities either directly or in the form of a close collaboration with researchers to provide essential technical support for research work.
Source: Court Administrative Appeal of Paris, 2nd chamber, April 11, 2018, N ° 17PA1714
In addition to qualification, it is therefore also necessary to be able to justify the participation of personnel in R&D operations, especially in the absence of a diploma or experience.
These conclusions echo previous case law:
June 2017 | JURISPRUDENCE - Retirement Benefits - June 2017
Article L242-1 of the CSS which considers the notion of indemnity to be remuneration in the broad sense has long been taken up by BOFIP until 2017. Since then, BOFIP has ruled out the application of this article and made its own restrictive application of what can be taken into account.
In this case, the judges emphasized in particular that the retirement indemnity relates to the entire career of the employee and not only to the periods during which the latter has devoted himself to research projects.
This conclusion is subject to interpretation since it suggests the possibility of valuing this compensation if the company has the capacity to justify the employee's R&D rate over his entire career.
On the basis of this restrictive application, the administration excludes, among other things, retirement indemnities.
Source: TA Montreuil of 06/08/2017, n ° 1604882
January 2017 | JURISPRUDENCE - Condition for taking into account a staff member placed at disposal (MAD)
The Disposition (MAD) necessarily implies the physical movement of the employee in the premises of the company and the use of the latter's resources.
As a reminder, all the criteria to be met are as follows:
An employee secondment contract between the 2 companies.
The costs must correspond only to the gross remuneration charged with the employer's contributions.
No margin, euro invoicing the euro. Any for-profit operation having as an exclusive object the loan of labor is prohibited.
An amendment to the employment contract, signed by the employee, specifying the work entrusted, the hours and the place of performance. Specifying that the employee remains under the authority of his or her original employer.
Work on the site of the beneficiary company.
Source: Council of State, 25/01/2017 n ° 390652
