This article was first published on Tax@Hand, and is reproduced on this blog with the authorization of its authors.
In a decision issued on 17 June 2026,[1] France’s Council of State (Administrative Supreme Court) held that the fact that a fixed asset is characterized as a prototype does not prevent the related depreciation allowances from being eligible for the research tax credit (RTC). The decision puts an end to a series of decisions against eligibility and takes a position in its favor.
The end of six years of tax uncertainty
While the tax law provides that “depreciation allowances on fixed assets created or acquired in a new condition and directly allocated to the performance of scientific and technical research operations, including the performance of operations for the design of prototypes or pilot facilities,” are eligible for the RTC, the recent interpretation of these provisions by courts of first instance and appellate courts has, for several years, become unfavorable to the inclusion of depreciation allowances on prototypes in the RTC base.
Everything began with a decision of the Bordeaux Administrative Court of Appeal[2] of 19 May 2020 in Jedo Technologies. In that case, which had atypical facts, the claimant company had requested the benefit of the RTC by reason of an exceptional depreciation charge corresponding to the entire gross value of a defective research and development (R&D) prototype that it had scrapped very recently before then. The Administrative Court of Appeal had held in general terms that “the [RTC], although it concerns research expenses such as depreciation allowances on fixed assets allocated to research operations for the design of prototypes, does not apply to the depreciation of the prototype itself.”
While that decision was most likely a case-specific ruling linked to a particular chronology, its wording has unfortunately been adopted since by several courts and even extended to annual depreciation of prototypes themselves. Examples include: Versailles Administrative Court, 8 June 2023, No. 2109850, SAS Ingenica Management Holding; Marseille Administrative Court, 5 December 2024, No. 2208278, Société I Soluce; and Douai Administrative Court of Appeal, 4th Chamber, 19 June 2025, No. 24DA01095, SAS Green Big.
The mere fact that the depreciation allowance was recorded in respect of a fixed asset characterized as a prototype led to its exclusion from the RTC base, on the grounds that the prototype was a research output. Strangely, for a few years, the courts have confirmed exclusion from the RTC base irrespective of whether the prototype was also used subsequently as a research tool for testing and, as such, contributed to the eligible depreciation expenses for the year.
The decision rendered by the Douai Administrative Court of Appeal in the SAS Green Big case is the one that was appealed to the Council of State and led the latter to rule on this much-discussed issue.
Clarification by the Council of State: Depreciation allowances on prototypes are eligible for the RTC
In the context of a research program concerning new systems for recycling plastic materials, SAS Green Big had acquired new parts and equipment intended to be assembled into prototypes of compacting machines, recorded as fixed assets and used to conduct tests for recycling plastic bottles. The tax authorities had excluded from the calculation of the RTC the allowances corresponding to the depreciation of these prototypes, which had been confirmed by the Rouen Administrative Court and the Douai Administrative Court of Appeal before the company’s appeal to the Council of State.
The Council of State ruled as follows: “expenditures corresponding to depreciation allowances on fixed assets created or acquired in a new condition and directly allocated to the performance of scientific and technical research operations give rise to entitlement to the research tax credit, regardless of the fact that those fixed assets may have the character of prototypes.”
The high court added that the Douai Administrative Court of Appeal committed an error of law in holding that the depreciation expenses at issue did not qualify for the RTC solely on the grounds that the expenses related to fixed assets having the character of prototypes.
Accordingly, the contested judgment was annulled and the case will be referred back to the Douai Administrative Court of Appeal to be decided on the merits.
The debate can be expected to shift to the issue of proving that the prototypes are allocated to R&D eligible for the RTC.
[1] Council of State, 9th and 10th Chambers jointly, 17 June 2026, No. 507371, SAS Green Big, mentioned in the tables of the Recueil Lebon.
[2] Bordeaux Administrative Court of Appeal, 5th Chamber, 19 May 2020, No. 18BX01407, Jedo Technologies.