Under the Article 244 quarter B, II, b of the French Tax Code, staff costs relating to staff holding a doctorate, directly and exclusively assigned to research operations, shall be taken into account for twice their amount during the First 24 months after the “first recruitment” of these personnel on the double condition:
- that their employment contract is for an indefinite duration
- the number of salaried research staff in the undertaking is not lower than in the previous year
According to the tax administration “the notion of “first recruitment” is assessed not at the level of the company but at the level of the young doctor. Thus, by “first recruitment”, it is appropriate to understand the first employment contract of indefinite duration (permanent contract) concluded after his doctorate by a young doctor for functions related to his level of diploma, regardless of the place of recruitment (in France or abroad)’ (BOI-BIC-RICI-10-10-20-20, n°210)
Open-ended contract concluded before obtaining the title of doctor: a new contract or an amendment must materialize the status of doctor
The company Novalix had retained as a young doctor as part of its RTC an employee who had been hired on a permanent contract before obtaining his doctorate.
The Administrative Court of Nancy notes that the staff in question had been recruited as a doctoral student in 2009 and had obtained their doctorate in June 2013, that those staff had not been the subject of a first recruitment as a doctor and that no new employment contract had been signed with them when obtaining their doctorate. It therefore considers that the company cannot benefit from the young doctor scheme for the calculation of the RTC 2014.
Novalix intended to rely on the administrative doctrine according to which:
- if before obtaining his doctorate, the young doctor has already concluded a permanent contract in the company, the first recruitment is deemed to take place, in the absence of conclusion of a new permanent contract
- on the date on which an addendum to the initial permanent contract recognizing the status of young doctor following the obtaining of the doctorate was signed
- or on the date provided for in a clause of the initial permanent contract which determines the recognition of the status of young doctor following the obtaining of the doctorate, without this date being able to be prior to the actual obtaining of the doctorate. » (BOI-BIC-RICI-10-10-20-20, No. 220).
The company defended the inclusion of this staff as a “young doctor” since they had obtained their doctorate in 2014 and benefited from an increase materialized in their 2016 pay slip which was analyzed according to the company as a recognition of his new status and an amendment to his employment contract – which is not subject to any formal condition.
The judge held that the company can only rely on doctrinal tolerance on the eligibility for the young doctor scheme of staff who have obtained their doctorate after hiring, if it enters ” in the forecasts of the doctrine, applied literally ». However, the Court explains, that is not the case here, since the company has not signed an amendment to the employee’s employment contract. It is therefore irrelevant that the young doctor would have benefited from an increase in 2016 (also after the dispute) which would materialize the implicit agreement of both parties on the conclusion of an amendment, in the absence of signature of such an amendment.
To ensure the benefit of the “young doctor” scheme in the case of staff recruited on permanent contracts before obtaining a doctorate, it is necessary to ensure strict compliance with the administrative doctrine and to formally sign an addendum to the initial permanent contract, recognizing the status of young doctor of the staff in question..
Impact of the termination of a first permanent contract that does not include a trial period
A rescript published on 9th March 2021, provides useful details on the characterization of a first recruitment in the presence of a young doctor who has not been hired at the end of a previous permanent contract, which did not contain a trial period.
The company behind the ruling had just hired a young doctor who had already concluded a permanent contract with a previous company, which had been the subject of a judicial liquidation 7 months after this recruitment, resulting in the economic dismissal of the employee. The company therefore asked whether this employee could still be considered a young doctor during this second recruitment.
Recall that the BOFIP already provides that ” when a first permanent contract ends during the trial period provided for in the Article L. 1221-19 of the Labour Code, it is not counted as a first recruitment for the application of the b of II of Article 244 quarter B of the French Tax Code. This tolerance is allowed only once. » (BOI-BIC-RICI-10-10-20-20, n°230).
The administration points out that, in accordance with the rules of social law, the maximum probationary period for an officer is four months renewable once and, on the other hand, that the employee has been economically dismissed less than eight months after the conclusion of his contract, or during the period that could have been used as a trial period.
Consequently, where these particular circumstances are met, the Administration accepts that it is considered that the personnel costs incurred by the company to remunerate the staff in question may be taken into account for twice their amount pursuant to (b) of the Article 244 quarter B of the French Tax Code in the case of RTC, all other eligibility conditions must be fulfilled elsewhere.
When a first permanent contract ends during the trial period provided for in the Article L.1221-19 of the Labour Code or, in the absence of a probationary period before the end of the applicable maximum probationary period, it is accepted that such recruitment shall not be counted as a first recruitment for the purposes of the b of II of Article 244 quarter B of the French Tax Code. This tolerance is allowed only once.