Finance Act - CII modifications in effect in 2023 related to the Finance Act 2022 - January 2023
The Finance Act for 2022 provided for a number of changes to the ITC, which will come into force on January 1, 2023:
To ensure that the system complies with Community law, the item corresponding to "other operating expenses" is excluded from the basis of expenses eligible for the ITC.
In order to compensate for this exclusion, the rate of CII (common law) goes from 20 to 30% and the rate applicable to Overseas goes from 40 to 60%.
Mechanically, this change of rate leads to an increase of the ceiling of the device to 120 000 €, against 80 000 € previously.
Indeed, as the eligible expenses are still 400 000€, the increase of the rate naturally leads to an increase of the tax credit ceiling.
These changes come into effect as of January 1, 2023.
Case law – Carry-back and use of a research tax credit – March 2022
• Contribution of the judgment, what to remember
“The profits giving rise to a tax paid by means of an excess research tax credit must be excluded from the basis for charging the deficit carried back. » (CE 3rd-8th ch. 10-3-2022 n° 443690, Technocer Company)
In other words, a company that chooses to carry-back its deficit cannot do so on the tax on previous profits paid thanks to the Research Tax Credit.
• Analysis of the tax team
What is carry-back? Carry-back allows companies subject to corporation tax to set off the deficit recorded at the end of a financial year against the profits of the 3 financial years preceding the loss-making year. This offset generates a receivable from the Treasury corresponding to the corporation tax paid in the profitable years.
For example: a company subject to corporation tax makes a loss of €300,000 for the financial year.
Over the previous financial year, it had made a profit of 300,000 euros taxable at the normal rate of 33.1/3%.
The company carries back deficits, it can carry back 300,000 euros.
The previous profit had been taxed at the normal corporate tax rate applicable for that year (33.1/3%). The tax claim is therefore equal to 100,000 euros (300,000 * 33.1/3%).
Impact of the judgment: If the CIR of the company had paid the IS for the previous year, then it is not possible to report the deficit on the amount paid by the CIR.
Source: CE 3rd-8th c. 10-3-2022 n° 443690, Technocer Company
https://www.legifrance.gouv.fr/ceta/id/CETATEXT000045336506?init=true&page=1&query=443690&searchField=ALL&tab_selection=all
MESRI – Publication of the new CIR guide – December 2021
The CIR 2021 guide has just been published. It now takes into account the changes in tax doctrine made during the July 2021 update.
- Staff costs :
The paragraph concerning “Other categories of eligible research personnel” now specifies that “May also be retained expenses relating to temporary workers when they are research personnel directly and exclusively assigned to R&D operations. It should be noted that the guide maintains the exclusion of the valuation of personnel under management (and thus adds to the law).
- Outsourced research expenses :
> The guide follows the diagram drawn up by the bofip and thus includes the outsourced work carried out in collaboration.
> Eligibility of related tasks :
The FNAMS case law (CE, decision of July 22, 2020, No. 428127) is integrated, the guide thus specifies that “Expenses relating to outsourced scientific and technical work which do not constitute R&D operations as such, but which are indispensable to the performance of an R&D operation eligible for the CIR carried out internally by the instructing party, may also be taken into account in the basis for calculating the CIR of the ordering company. In doing so, the guide distorts the terms used by the Council of State, which referred to expenditure required to research projects and not "an essential feature for carrying out an R&D project".
> Methods of calculating the CIR for an approved subcontractor :
The guide indicates in this respect that: "The sums received by the research organizations or experts designated in d) and d bis) of the CGI are deducted for the calculation of their own tax credit, in order to avoid that the same category of research expenditure is taken into account twice. »
The guide also mentions the TAKIMA decision (EC, decision of September 9, 2020 No. 440523). As a reminder, this decision put an end to the interpretation made by the Administration of this neutralization mechanism (which added to the law and could sometimes result in generating a negative CIR). It specifies that the Council of State interprets the aforementioned provision "as the obligation for research organizations to exclude from the basis of calculation of their own CIR the eligible expenses incurred for the performance of research operations carried out on behalf of third parties, and not all of the sums received".
> Finally, concerning sub-contracting in sequence, the exclusion of services provided by a third-tier sub-contractor is not expressly repeated but implicit.
- Public subsidies :
The guide indicates that zero-rate innovation loans (PTZI) distributed by Bpifrance follow the same treatment as that applicable to repayable grants. They must therefore be deducted from the valued base, for the year of exposure of the expenses covered by the loan.
Source: https://www.enseignementsup-recherche.gouv.fr
Jurisprudence - A group's tax director cannot act on behalf of a subsidiary without a mandate - October 2021
In this case, the tax director of the group had obtained from the managing director of the subsidiary, the power to appeal permanently to the competent courts in tax matters.
The Conseil d'Etat points out that "it follows from the aforementioned provisions of article L. 227-6 of the French Commercial Code, on the one hand, that the managing director of a simplified joint-stock company cannot exercise the powers granted by this article to the chairman, who is vested by law with the broadest powers to act in all circumstances on behalf of the company within the limits of the corporate purpose, only if the statutes of this company so provide and, secondly, that any restrictions on the powers of the Chairman, and consequently of the Chief Executive Officer, provided for in the Articles of Association, are not enforceable against third parties, are to society".
The statutes of the subsidiary provided that "its president, and consequently its managing director, could not take legal action in the name of the company, except in an emergency, without the prior authorization of the Board of Directors ". As the subsidiary was unable to produce before the administrative court the authorization given by the board of directors, the request at first instance signed by the group's tax director was therefore inadmissible.
Source: légifrance.gouv.fr
Case law - The recognition of the quality of JEI does not prevent a subsequent questioning of the eligibility of projects - July 2021
The Paris Administrative Court of Appeal was questioned on the possible position taken by the administration regarding the eligibility of projects within the framework of an application for the status of Young Innovative Company.
Companies that meet the conditions set out in Article 44 sexies-0 A of the French General Tax Code (CGI) and therefore qualify as Young Innovative Companies (JEI) are eligible for tax and social security benefits.
Despite the automatic application of this scheme, it is recommended that companies question the tax authorities under the specific rescrit procedure. Article L. 80 B 4° of the LPF stipulates that companies can check with the tax authorities that they meet the legal conditions for benefiting from the provisions of article 44 sexies-0 A of the CGI.
In the judgment in question, the tax administration had called into question the expenses incurred by the company by raising the lack of novelty of the work and that the work was not basic research as initially presented. However, the company tried to argue that the administration had recognized it as a JEI, and thus contradicted itself by questioning the projects for ineligibility.
The Paris Court of Appeal ruled that the fact that the tax authorities had recognized the company's status as a JEI did not mean that the company had taken a position on the eligibility of its research projects for the disputed tax credit. In addition, it should be noted that the considerations of the regional research and technology directorate are not binding on the tax authorities, as they do not constitute a position taken by the tax authorities themselves.
Source: CAA de PARIS, 5th chamber, 07/08/2021, 18PA01318, Sté Procton Labs
Case law – Possible default interest depending on the repayment period – May 2021
Reimbursement of the company's CIR which occurs more than 6 months after the taxpayer's request gives rise to the payment of default interest.
This can apply in 2 cases, whether the administration has remained silent or whether it has continued the analysis procedure leading to partial or total acceptance.
Source: CE, May 11, 2021, No. 441603, Acofi Gestion and CE, May 11, 2021, No. 442936, Groupe ESA
Case law - Non-admissibility of a reimbursement request deemed late - April 2021
In a judgment of April 15, 2021, the Administrative Court of Nantes ruled on the validity of a reimbursement request considered late by the tax administration.
In this case, the company had incurred research expenses in 2010.
The company declared its expenses in order to benefit from the research tax credit in a special declaration issued on July 15, 2013.
On May 12, 2017, it sent a contentious complaint to the administration to request reimbursement of the debt acquired during the realization of the research expenses of 2010, declared in 2013.
On April 20, 2018, the tax administration rejected his request for late filing of the claim.
The case was referred to the Administrative Court of Appeal, which ruled that it was the company's responsibility to "apply before December 31, 2016 for repayment of the research tax credit available to it in 2010, which it had not used in that year, or in the three following years 2011, 2012 and 2013, due to its loss-making situation".
Thus, the company had to consider the theoretical reporting year as the starting point for charging in order to request reimbursement from January 1, 2014, and not to consider the special declaration date as the starting point.
Source: CAA de NANTES, 1st bedroom, 04/15/2021, 19NT02627, SAS Transports Blochon-Martin
Press release - Renewal of the request for early repayment of tax credit debts before the filing of the tax package - March 2021
In a press release dated March 2, 2021, Bruno Le Maire, the Minister of the Economy, Finance and Recovery, announced new tax measures to support companies facing economic difficulties due to the health crisis, in particular the renewal of the request for early repayment of refundable tax credits in 2021.
In terms of tax credit, it is expected that the request for restitution of receivables recoverable in 2021 (including the Research / Innovation tax credit), can be requested in advance, before filing the tax return.
Only receivables recoverable in 2021 are therefore concerned (CIR 2020 for SMEs, and CIR not charged for at least 3 years following the declaration for others).
The applicable procedure, specified in the Frequently Asked Questions of the DGFIP devoted to the health crisis, is unchanged compared to last year.
Source: Press release March 2, 2021 - Bruno Le Maire
Case law - Need for the official of the Ministry to request additional information before concluding - February 2021
The MESRI agents who intervene in the tax audit of the Research Tax Credit, are not subject to the obligation to have an oral and contradictory debate with the verified taxpayer.
In a judgment of February 3, the Council of State ruled on the impact of non-compliance with the procedure by officials of the ministry.
The Council of State began by recalling that the officials of the ministry are not subject to the obligation to hold an oral and contradictory debate with the co-payer.
On the other hand, non-compliance with other MESRI obligations can lead to a procedural irregularity, as this would deprive the company of a guarantee. Of course it is necessary to prove a correlation between the non-respect of the procedure by the agent of the ministry and the deprivation of a guarantee having had an influence on the decision of reorganization.
Article R 45 B-1 of the Book of Fiscal Procedures lists the obligations of the agents of the ministry seized within the framework of a control.
The 4 obligations are that the agent must:
- send a request for supporting documents to the company controlled under the CIR.
- guarantee the company a period of thirty days to respond (if necessary extended by the same period on request),
- give the company the option of talking to the agent in charge of the control as part of a second request for additional information,
- and finally, to justify the opinion delivered by the agent of the MESRI when the reality of the allocation to the research of the controlled expenditure is disputed.
Despite the obligations listed, this does not necessarily create an oral and contradictory debate as there is in an accounting verification procedure.
Here, the procedure implies that the MESRI agent, who will note the insufficiency of the supporting documents provided, cannot give his final opinion without having addressed to the company a first request for additional information, then, if necessary, a second which can be the opportunity for the taxpayer to request an interview.
In the present case, the agent of the ministry had not followed the procedure since in his final report, he relied in particular on the insufficient nature of the explanations provided by the company, whereas he had not previously asked him to additional information contrary to what is provided for in article R 45 B-1 of the LPF.
The Council of State then noted that this lack of demand had deprived the company of a guarantee.
Source: Council of State of February 3, 2021 n ° 431253
Finance Law - Additional reporting obligation for companies with expenditure exceeding 10 million euros – January 2021
For companies investing between 10 and 100 million, a declaration of the holders of a doctorate financed by the CIR or recruited on this basis must be established in Annex 1 of Cerfa 2069a, taking into account the number of FTEs (equivalent time full) corresponding and their average remuneration.
Government measure - Postponement of the 2016 CIR prescription deadlines - July 2020
The deadlines granted to both the administration and the taxpayer are suspended up to and including August 23, 2020, and start running again from August 24, 2020.
The deadline for resuming administration concerning the 2016 CIR will expire after 14/06/2021 (31/12/2020 + 165 days).
Finance law for 2020 - Operating costs - February 2021
The rate of operating costs calculated on staff costs is lowered from 50% to 43% as of CIR 2020.
Case law - Contestation of a refusal of reimbursement - December 2019
It was judged that despite the recognition of an innovative character by the ministry, this was not enough to justify the absence of new techniques. The Court reiterates that the request for reimbursement is a contentious decision.
In this case, a company had requested a reimbursement request for its research tax credit. The tax authorities had refused the applicant company to obtain its reimbursement. The company argued that there was no reason for the rectification proposal and the absence of referral to the advisory committee without bringing new arguments to its case. It requests the appointment of an independent expert.
The Administrative Court of Appeal reiterates the principle according to which the refusal of reimbursement by the administration of the research tax credit is of a contentious nature and does not have the character of a recovery or reorganization procedure. As a result, the guarantees attached to a refusal of reimbursement are not the same as during a recovery or recovery procedure.
The Court reiterates that as long as the company does not justify the new character, does not contradict the opinion of the expert or that of the administration and that it makes no criticism, the latter is not in a position to to demonstrate that its activities constitute a substantial improvement of the processes.
Source: CAA of Nancy, December 27, 2019, n ° 18NC02396
Case law - Guidance on the use of reasons by the administration - December 2019
On the one hand, the administration had refused the reimbursement of the tax credit and had notified a rectification proposal to the company, setting out the reasons for the refusal of reimbursement. However, the Council of State, relying on Articles L 57 and R 57-1 of the Book of Tax Procedures, ruled that the notification of a rectification proposal for the sole reason of referral to the decision rejecting the reimbursement , was not sufficient motivation for the administration.
On the other hand, it was ruled by the Council of State that when the taxpayer receives a proposal for rectification but does not dispute it and does not add any new element to the reasons of the administration, the resumption of the reasons for the response to the taxpayer's observations is on the other hand valid when the taxpayer does not bring any element of dispute to his observations.
Source: CE, December 4, 2019, n ° 424178
The Council of State came to recall the importance of the presence of reasons in a contentious procedure as well as the distinction between an on-the-spot control and on documents.
Case law - Right of return of the CIR within a group - July 2017
Only the parent company is entitled to request the refund of a fraction of corporate tax resulting from the allocation of tax credits for research expenses incurred by other companies belonging to the group.
Source: CAA Versailles of 07/20/2017, n ° 16VE02595
