CIR New Collections: Whenadministration a Rejection

A company that designs climbing shoes was subject to a tax audit during whichadministration the research tax credit for expenses related to the development of new collections.

The key question was whether the company could be considered part of the textile, apparel, and leather sector, since the slippers were manufactured under a contract for work by a Moroccan subcontractor to whom the company provided the machinery.

If the company had a machine on its premises in France, the Court notes that:

• "This machine is used exclusively for'cutting certain types of slippers assembled in Morocco, including prototypes, pre-production runs, or non-standard sizes'";

• The lease agreement for the premises prohibits any industrial or artisanal production.

Furthermore, while the company does indeed have the industrial equipment listed as an asset, this refers to the machinery installed in Morocco.

The Court concludes that while the company“creates the designs and develops the prototypes, establishes the manufacturing process and oversees it on-site, supplies the raw materials to the Moroccan company, and markets the products while assuming the manufacturing risks, it does not itself carry out the production or processing of goods, which is entirely outsourced to the Moroccan company .”

It considers that, under the law, the company cannot be regarded as“engaging in an industrial activity involving the manufacture or processing of tangible movable property that would entitle it to claim the research tax credit for expenses incurred in developing new collections.”

However, the company sought to invoke an administrative ruling (BOI-BIC-RICI-10-10-40-20230413, No. 20) which provided that“the benefit of the provision cannot therefore be denied to companies that use subcontractors as long as they own the raw materials and assume all risks associated with manufacturing and marketing.”

The Court finds that this doctrine is indeed enforceable under Article L.80 A of the Code of Tax Procedure.

It therefore overturns the tax assessment.

CAA Lyon, June 5, 2025, No. 23LY03725

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