French Research Tax Credit rules (“RTC”) have been modified by the 2020 Finance Act.
- Expenses incurred from 1 January 2020 are set at 43% of personnel costs
- Expenses incurred for work subcontracted to public organizations or approved private organizations can be included in the basis of calculation of the RTC
- The 2020 Finance Act stipulates that the research work must be carried out directly by the organizations to which it was subcontracted
- On an exceptional basis, the public organizations or approved private organizations can commission other public or approved private organizations to carry out “any work required for this research work”
Company A
- Approved Private Organization 1
- Approved Private Organization 2
In this case, Company A can include in the basis of calculation of the RTC the aggregate amount of expenses incurred for the research work
subcontracted to Approved Private Organization 1 and for “any work required for this research work” subcontracted to an Approved Private
Organization at the second level
Company A
- Approved Private Organization 1
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NON-approved Private Organization 2
In this case, Company A cannot deduct any amount for the basis of calculation of the RTC insofar as Approved Private Organization 1 subcontracts work to a Non-approved Private Organization at the second level
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- Care must be taken when drawing up subcontracting agreements, which must refer to the public or approved private organization concerned. Failing this, the applicant company may lose entitlement to the RTC for the expenses concerned.
- Applications for approved private organization status must be sent to the Ministry of Research between 1 January and 31 March of the year concerned.
- Applications for renewal of the status must be sent to the Ministry of Research between 1 September and 30 November of the last year for which the approval was granted
- The 2020 Finance Act further stipulates that the expenses to be taken into account in the basis of calculation of the RTC, for twice of their amount, in the case of work subcontracted to a public organization, are those solely relating to the portion of work carried out by that public organization.
Company A
- Public Organization
- Approved Private Organization 1
In this case, Company A can deduct twice the amount of the expenses incurred for work subcontracted to a public organization and carried out solely by that organization. The expenses for work subcontracted by the public organization to an approved private organization can only be taken into account for their actual amount.