(Paris Administrative Court, Mar. 6, 2014, no. 1301796/2-3, Société Lectra)

Article 49 septies I of Schedule III of the French Tax Code provides that remuneration and incidentals and social charges, if they are mandatory social contributions, must be taken into account in research expenses that are eligible for the CIR.

However, the tax authorities did not provide a list of mandatory social contributions, notably for contributions paid within the framework of collective bargaining, "branch" or group and company agreements.

In an April 11, 2013 decision, the Montreuil Administrative Court (no. 1203780, ST Microelectronics) specifically ruled that any payments made pursuant to the national retirement and pension bargaining agreement for executives could be included in the expenses that create the right to the CIR if they were mandatory and created a right to receive benefits.

In the Société Lectra decision cited above, the Paris Administrative Court made a similar ruling by confirming that additional health expenses paid by a company pursuant to a company agreement were to be taken into account.  In this particular case, the company, Lectra, was not covered by a "branch" agreement regarding the terms of an illness pension regime, but the company agreement was mandatory for all of its signatories, pursuant to the provisions of Article 2262-1 of the French Labor Code.  From this the Court deduced that, in combination with the provisions of Article L. 911-1 of the French Social Security Code, these expenses-which involved the payment of contributions that created rights, including the right to receive benefits from a social security regime-had to be construed as mandatory social contributions within the meaning of Article 49 septies I-b) of the French Tax Code.

This case appears to be relatively straightforward and the Court's findings are relatively logical.  It will be interesting to see other situations where employees' payment obligations or the payment of such contributions by companies are more complicated to analyze, to see just how far one has to take into account expenses related to employees assigned to eligible research.

At the same time, for the legal foreseeability they wish to institute, including for companies that claim a right to benefit from the CIR, the tax authorities should also complete their official doctrine on this specific subject.