The Conseil d'Etat finally defines the notion of public subsidy for the purposes of the Research Tax Credit.
In a decision handed down by the Conseil d'Etat (February 20, 2023, CE 9ème chambre n°463363, Institut Forêt Cellulose Bois-Construction Ameublement (FCBA)), the supreme court rules on the notion of subsidy within the meaning of the Research Tax Credit (CIR).
The judges define subsidies within the meaning of the CIR as "any aid paid by a legal entity governed by public law for operations qualifying for the tax credit"..
In this decision, the judges overturn the decision of the Administrative Court of Paris (CAA Paris, February 18, 2022, Institut Forêt Cellulose Bois-Construction Ameublement (FCBA), which defined a subsidy as follows "Any aid, paid with a view to or in return for a research project, deriving from the use of resources received on a compulsory basis and without consideration, whether such aid is paid by an administrative authority or a private body entrusted with a public service mission".
A welcome decision, which continues to define the notion of subsidy within the meaning of the CIR.
There is no legal definition of a public subsidy within the meaning of the CIR..
However, the French General Tax Code (Article 244 quater B of the CGI) and administrative doctrine (BOI-BIC-RICI-10-10-30-20) state that "Public subsidies received by companies for operations giving entitlement to the research tax credit (CIR) are deducted from the bases for calculating this tax credit, whether they are definitively acquired by the company or reimbursable.
Defining the notion of public subsidy was therefore of paramount importance to tax filers. In the absence of a specific definition for the research tax credit, we had to turn to a more "general" definition.
The legislator has had the opportunity to define (law no. 2014-856 of July 31, 2014 on the social and solidarity economy (JO August 1; art. 74)) the subsidy: "Subsidies, as defined by the present law, are optional contributions of any kind, valued in the act of allocation, decided by the administrative authorities and bodies responsible for the management of an industrial and commercial public service, justified by a general interest and intended to carry out an action or investment project, to contribute to the development of activities or to the overall financing of the activity of the beneficiary private-sector organization. These actions, projects or activities are initiated, defined and implemented by the beneficiary private-sector organizations. These actions, projects or activities are initiated, defined and implemented by the beneficiary private-sector organizations / These contributions may not constitute remuneration for individualized services meeting the needs of the authorities or organizations granting them"..
What about case law on the definition of subsidy for the CIR?
Jurisprudence has also had occasion to rule on the subject on several occasions.
- The Conseil d'Etat, "Cinémathèque Française" opinion of May 18, 2004responsible for distinguishing a subsidy contract from a public procurement contract, had the opportunity to specify that he "It follows from [the definition of a public contract] that a public contract can only be defined as a contract concluded for consideration by a public entity with a view to acquiring the goods, works or services it requires, which stipulates a remuneration or price directly linked to the supply of an individualized service to the contracting entity or to the entry of goods into its assets".and that since the contract "stipulates a remuneration or price directly linked to the provision of an individualized service to the contracting authority".then the contract does not qualify as a subsidy.
- The judges of the Paris Administrative Court of Appeal (CAA Paris 18-2-2022 no 19PA01989, Institut Forêt Cellulose Bois-Construction Ameublement (FCBA)in a decision cited above, therefore, specify that in the absence of a definition of the term "public subsidy" within the meaning of the provisions of Article 244 quater B, III of the CGI, "Any aid paid with a view to or in return for a research project, deriving from the use of resources received on a compulsory basis and without consideration, whether such aid is paid by an administrative authority or a private body entrusted with a public service mission, must be considered as such".
- In another case (Marseille Administrative Court of Appeal, January 17, 2019, SARL Promete), ruled that in the case of a zero-rate loan that had not been deducted by the company "OSEO is a finance company, majority-controlled by the French State (61.5 %) and the Caisse des dépôts et consignation (27 %), whose purpose is to finance investments and support innovation by small and medium-sized businesses through grants and loans. The aid granted by this organization must be considered as an indirect public subsidy, which must be deducted from the research tax credit base for the year in which it was granted".
The notion of subsidy within the meaning of the CIR is now more precisely defined
These decisions show that a subsidy within the meaning of the CIR is a sum paid by a public body without consideration for the beneficiary.
Several legal precedents (although the Conseil d'Etat, in our view, has never ruled on the subject) have specified that the 0-rate loan from Bpifrance also constituted a subsidy that had to be deducted from the research tax credit base.
The judgment commented on here therefore provides the important clarification that an unrequited payment will only be deducted if it is granted by a public body.
The question arose following the Paris Administrative Court's ruling that a sum paid by a private organization entrusted with a public service mission should be deducted from the taxpayer's CIR base.
As a result, taxpayers are now in a better position to decide what constitutes a subsidy, and how to secure their research tax credit in this respect.
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