RTC & the concept of public subsidy

Paris Administrative Court of Appeal judged that the subsidies paid by the professional committee for the development of the French wood furniture industries (CODIFAB) and by the national inter-professional association France Bois Forêt (FBF), have the character of public subsidies, and must be deducted from the basis of the Research Tax Credit. This decision clarifies the boundaries of the “public subsidy” concept.

A reminder

Public subsidies received by companies in connection with operations giving entitlement to the RTC, are deducted from the basis of the RTC, whether they are definitively acquired by them or refundable. (CGI, art. 244 quarter B, III).

However, the concept of public subsidy is not defined by law, nor by administrative guidelines, nor really by case laws.

A few decisions have settled the matter of some subsidies (Qualification of public subsidies of the zero innovation rate loan granted by the company Oséo – Marseille Administrative Court of Appeal, 17 January 2019, n°17MA00208 – subsidies paid by ANRT for the employment of “CIFRE” doctoral students – Versailles Administrative Court of Appeal, 6 November 2014, n°13VE01842, Sté Microelectronics – research aid granted by EDF’s Studies and Research Department before its privatisation –Nantes Administrative Court of Appeal, 4 January 2006, n°04-1271, SA Delta Dore).

History

The Technological Institute Forest Cellulose Wood Construction and Furnishing (FCBA) – a private body entrusted with a public service mission as an industrial technical centre in charge of the forest, wood, cellulose and furniture sectors-, has the mission to promote technical progress and to participate in improving the yield and guaranteeing the quality of wood in industry.

The FCBA requested a statement from the Administration regarding the calculation of the RTC from which it intended to benefit. The Administration informed it, through a ruling, that the subsidies received from professional committee for the development of the French wood furniture industries (CODIFAB) and the national inter-professional association France Bois Forêt (FBF) had the character of public subsidies, that must be deducted from the RTC’s basis.

The territorial panel of second instance confirmed this position, as did the Administrative Court of Melun to which the case was referred.

The decision of Paris Administrative Court of Appeal

Before pronouncing, the Court provides, in a welcomed manner, clarifications on the concept of “public subsidy”.

It rules that, in the absence of a legal definition, it must be considered as constituting a public subsidy “any subsidy, paid for or in return for a research project, deriving from the use of resources received on a compulsory basis and without compensation, whether such subsidy is paid by an administrative authority or a private body entrusted with a public service mission”.

It then proceeds to analyse the subsidy received and concludes that the funds which made it possible to finance the contested subsidies were compulsory for the actors in the sector, who pay them without compensation.

Alice de Massiac

Alice de Massiac, Partner, has developed extensive expertise in supporting major French and foreign multinational companies, both in consulting and tax controversy, anticipating the impact of the proposed recommendations in […]

Clara Maignan

She joined Deloitte Société d’Avocats (French law firm of the Deloitte network) in 2011. She is a manager in the Knowledge Management department.