A foreign-owned French subsidiary can, in principle, claim the French Research Tax Credit (CIR, crédit d’impôt recherche) in the same way as another French company. The nationality of its shareholders is not the test. The decisive questions are whether the French company is within the statutory tax regime, whether it carries out qualifying research and development (R&D) work, whether the claimed costs are connected to that work, and whether the file can prove each step when the French tax administration or the Ministry of Higher Education and Research reviews it.

This distinction matters in an international group. A parent may pay researchers abroad, recharge a technology team, or appoint a university or engineering company. None of those facts automatically makes the resulting invoice an eligible CIR expense for the French subsidiary. The subsidiary needs a clear map between the technical project, the entity that performs each task, the location of the work, the legal status of any research provider, the accounting treatment and the annual tax declaration. A foreign parent’s invoice is evidence of a payment, not evidence that the French statutory conditions have been met.

The current rules also require attention to timing. The credit is calculated by reference to the calendar year in which qualifying expenses are incurred, even where the company closes its accounts on another date. This article explains how a foreign founder or group finance team can qualify a French subsidiary’s own research, assess foreign or related-party subcontracting, prepare the technical and financial evidence, and use a rescript procedure when the eligibility question is genuinely uncertain.

I. Can a foreign-owned French subsidiary claim the CIR and which costs qualify?

A. Does foreign ownership prevent a French subsidiary from claiming the CIR?

Foreign ownership is not, by itself, an exclusion. Article 244 quater B of the French General Tax Code (CGI, Code général des impôts) identifies the companies that may benefit by reference to their activity, taxation and qualifying research expenses. The current wording covers industrial, commercial and agricultural businesses taxed on their actual profit, together with certain exempt businesses. It does not make French ownership of the share capital a condition. A French société par actions simplifiée (SAS, a flexible French joint-stock company) owned by a United States, British, Canadian, Swiss or other foreign parent can therefore enter the analysis if its own situation meets the rules.

The statutory starting point is the current version of Article 244 quater B of the CGI. For ordinary research expenditure, the rate is 30% on the portion up to €100 million and 5% above that threshold. The same article contains other, separate categories and rates, including a distinct category for certain small and medium-sized enterprise prototype work. A calculation should not apply the 20% rate for that separate category to ordinary research without first checking the exact statutory conditions and the relevant accounting year. The figure that appears in a group budget is not a substitute for classifying each project.

The company must then show that the underlying work is research rather than ordinary commercial development. The legal definitions in Article 49 septies F of Annex III to the CGI distinguish fundamental research, applied research and experimental development. In practical terms, the project should address a genuine scientific or technical obstacle. A product roadmap, routine configuration, standard integration, ordinary maintenance, cosmetic improvement or a project that simply applies known methods is not converted into qualifying R&D by calling it “innovation”. The company should be able to identify the state of knowledge at the start, the uncertainty that remained, the hypotheses considered, the technical method used and the results, including unsuccessful tests.

For a foreign-owned subsidiary, the place where the work is performed is important. Article 244 quater B requires the expenses, apart from the particular intellectual-property exceptions in the text, to correspond to operations located in the European Union or in another European Economic Area state that has an administrative-assistance convention with France. The same provision also requires the expense to be retained for the ordinary determination of taxable profit. A French company cannot simply claim every research invoice paid by the group around the world. Work performed in the French subsidiary’s laboratory, office or technical environment is easier to map; work directed and performed by the foreign parent needs its own analysis of the contracting entity, the provider, the location and the statutory category.

There is a second distinction between ownership and economic control. A parent may own 100% of the French subsidiary and still provide a real service. But common ownership creates a related-party context in which the price, allocation and benefit require careful support. The transfer-pricing principle in Article 57 of the CGI can become relevant when a French company accepts terms that differ from those that independent businesses would have negotiated. The subsidiary’s CIR file and its transfer-pricing file should tell the same story: who performed the work, who bore the technical risk, what the French company received and how the amount was calculated.

That is why a French subsidiary should separate three situations in its project register:

1. research carried out by the French company’s own employees or people placed at its disposal and working with its means;
2. research commissioned from a qualifying and approved external research body; and
3. ordinary group support, licence payments, management services or shareholder activities that may be deductible or taxable under other rules but do not automatically form part of the CIR base.

The third category is often where an international group makes its first mistake. A French subsidiary may receive a monthly “R&D management fee” from its parent. That label does not prove that the parent carried out a qualifying research operation on behalf of the subsidiary, that the parent is an approved research provider, or that the invoice falls within the statutory subcontracting limits. The invoice may need to be analysed as an ordinary intra-group service, a royalty, a cost contribution or a research subcontract. Each classification has different consequences.

The French company’s legal form and registration remain relevant to the wider file even though they do not create the CIR right by themselves. Keep the current Kbis, meaning the official extract showing the company’s registration and legal details, and the information filed through the INPI Guichet unique. INPI is the French National Institute of Industrial Property. The company’s registered office, representative, activity and ownership chain should be consistent in the research contract, invoices, payroll records, board documents and tax returns. An inconsistent legal identity does not automatically destroy a claim, but it creates avoidable questions about who actually incurred and controlled the expense.

Foreign tax residence also needs to be kept separate from French eligibility. The parent may be resident in a country with its own R&D incentive, and the group may need to examine that country’s rules on the same project. A French CIR analysis does not guarantee that the parent can claim a second benefit, and a foreign incentive does not enlarge the French base. The group should record which entity owns the technical results, which entity bears the expenditure, and whether a separate national rule restricts double incentives or requires an adjustment.

The most useful decision test is therefore not “Is the company foreign-owned?” It is “Can the French company prove a qualifying operation and a qualifying expense under the rule applicable to the relevant year?” If the answer is yes, foreign ownership is normally a background fact. If the answer is no, changing the invoice description or moving the charge through another group entity will not cure the weakness.

B. Which internal people, equipment and operating costs are counted?

Article 244 quater B lists several categories. For internal work, the central category is the personnel cost of researchers and research technicians who are directly and exclusively assigned to qualifying operations. The French company should identify the people, their technical role, the projects on which they worked, the periods concerned and the proportion of their time that can be supported. A job title such as “engineer” or “data scientist” is not enough. The file should explain the technical work and show how the payroll amount is allocated.

Time records do not need to be artificial if the company has a reliable project system, but they must be sufficiently detailed to reconstruct the allocation. A monthly record can link a person to a project code, task, experiment, test, review or deliverable. When an employee works on both research and commercial implementation, the company should split the time on a defensible basis. Claiming 100% for every technical employee in a young subsidiary is especially risky when the same people also sell, install, support customers or manage ordinary production.

The rule also treats other operating costs by a statutory flat-rate method. The current Article 244 quater B fixes those amounts at 75% of the qualifying depreciation allocations and 40% of qualifying personnel expenses. The company should not replace those percentages with a second estimate of actual overheads for the same category. It should first determine which personnel and depreciation amounts are eligible, then apply the legal mechanism and retain the calculation that connects the result to the project list.

Depreciation can qualify when it concerns new fixed assets created or acquired in new condition and directly assigned to scientific or technical research operations, including prototypes or pilot installations. A machine bought for general production does not become a CIR asset merely because a researcher uses it occasionally. Keep the purchase record, commissioning date, asset register, depreciation schedule, technical allocation and evidence of actual use. Where the asset is used for several purposes, document the allocation rather than treating the entire annual depreciation as research expenditure.

The Conseil d’État addressed the prototype point in a recent decision. In Conseil d’État, 17 June 2026, no. 507371, concerning Green Big, the court held that research depreciation could qualify “sans qu’ait d’incidence la circonstance que ces immobilisations revêtiraient le caractère de prototypes.” The exact wording means that the fact an asset is a prototype does not, by itself, defeat the depreciation claim. It does not remove the other requirements: the asset must be new, directly assigned to qualifying research, properly depreciated and connected to an operation that meets the scientific or technical test. The case is useful because it prevents one over-simple rejection, not because it turns every prototype into eligible expenditure.

A person temporarily made available to the French company can also require a precise analysis. In Conseil d’État, 25 January 2017, no. 390652, Intuigo, the court explained that eligible personnel expenses were not limited to remuneration and social charges for people directly employed by the company. The court stated that the rule could extend to “Ces dispositions ne limitent pas les dépenses de personnel susceptibles d’ouvrir droit au crédit d’impôt aux seules rémunérations et charges sociales versées pour des personnes employées par l’entreprise et affectées à des opérations de recherche susceptibles d’ouvrir droit à ce crédit, mais s’étendent aux rémunérations et aux charges sociales prises en charge par l’entreprise au titre de la mise à sa disposition par un tiers de personnes afin d’y effectuer dans ses locaux et avec ses moyens des opérations de recherche.” This is an exact extract from the decision. The operational safeguards are the person’s actual work in the French company’s operations, use of the company’s premises and means, an identifiable cost borne by the French company, and proof that the work is qualifying.

Do not apply older personnel incentives without checking the period. The conditions applicable to a historical double-counting rule for employees holding a doctorate have changed over time. For example, Conseil d’État, 31 May 2024, no. 476354, Awalee Consulting, held in the circumstances of that case that the double amount applied only from the date the doctorate was obtained when that date followed recruitment. The exact temporal version of Article 244 quater B and the declaration year must be checked before any such adjustment is entered. A foreign group should never copy a calculation from an earlier French tax year into a current return without reviewing the amended text.

As an illustration, assume a French subsidiary has €200,000 of supported qualifying research payroll and €80,000 of qualifying depreciation during a calendar year. The statutory operating-cost amounts would be €80,000 for the personnel component and €60,000 for the depreciation component, before other adjustments. The illustrative base would therefore be €420,000 and the ordinary 30% rate would produce a theoretical €126,000 credit. This is not a filing result: the company would still need to exclude non-qualifying work, verify the common-law deductibility and geographic conditions, account for any grant or other adjustment, and apply the correct rule for subcontracting. The example shows why a transparent bridge from payroll and asset records to the return matters.

Research work can also create intellectual-property and standardisation costs, but those categories have specific statutory conditions. They should be mapped separately instead of added to a general “innovation” line. A project register should identify the relevant provision, the technical operation, the accounting account and the supporting evidence for each category. This approach is especially useful when a foreign parent reports the project in a different accounting vocabulary from the French subsidiary.

II. How should subcontracting, group charges and proof be handled?

A. Can a French subsidiary subcontract research to its foreign parent or another group company?

Subcontracting is possible, but an international group must distinguish an approved research provider from an ordinary related company. Article 244 quater B, II, d bis covers expenses for operations of the same nature entrusted to organisations approved by the French minister responsible for research, or to scientific or technical experts approved under the relevant rules. For providers established in a European Union state or in another European Economic Area state with the required administrative-assistance convention, the article describes routes involving French approval or an equivalent approval by the competent authority of the provider’s country when a similar system exists.

The approval framework is set out in Article 49 septies H of Annex III to the CGI. The provider should be able to show the research activity and the documents required for approval. The official Service-Public CIROCO information explains the practical purpose of the approval: a provider carrying out research for clients needs the relevant approval for the client to treat the outsourced operation as a CIR expense. Service-Public is the French public-administration information service; CIROCO is the official tool used for information about approved research providers. Check the provider’s status for the period of the work and keep the approval evidence with the contract.

A foreign parent is not automatically an approved research organisation. It may have excellent laboratories, employ qualified researchers and own valuable patents while still failing the specific approval condition for the French subsidiary’s outsourced CIR expense. The parent may invoice the French company for a genuine intra-group research service under ordinary tax and transfer-pricing rules, but the French company should not place that invoice in the CIR base unless the subcontracting rule and provider-status requirements have been checked. The analysis is more difficult where the parent is outside the European Union or European Economic Area because the location and approval wording in Article 244 quater B must be applied to the precise arrangement.

The statutory caps also matter. Article 244 quater B limits approved-provider expenditure to three times the total of the other qualifying research expenses before the additional limits are applied. The expenses enter the base within a global limit of €2 million per year. That limit is increased to €10 million where the outsourced research is entrusted to approved bodies and there is no relationship of dependence, within the meaning of the tax code, between the beneficiary company and those bodies. A group company should not assume that the €10 million ceiling applies simply because the provider is incorporated in another country. Related-party status must be analysed, and the lower limit may be relevant.

The operations must also be performed directly by the approved body to which they were entrusted, subject to the statutory exception allowing that body to use another approved body for certain necessary work. The contract should identify the operation, the scientific or technical question, the deliverables, the period, the location, the personnel or facilities involved and any permitted onward subcontracting. An invoice that only says “R&D services” will not explain whether the provider performed the work, passed it on, or delivered ordinary implementation.

The Conseil d’État confirmed the anti-double-counting logic in Conseil d’État, 18 June 2021, no. 433319, Sopra Steria. The court held that sums received by approved private research organisations for qualifying operations entrusted by beneficiary companies “constituent, pour ces entreprises donneuses d’ordre, des dépenses éligibles à ce crédit.” The same decision explains that a subcontracting research organisation cannot include the expenses it incurred to carry out those operations in its own CIR base. In other words, the structure is not designed to create two credits for the same research operation. The French subsidiary should obtain enough information to identify the provider’s role and avoid counting the same payroll, equipment or external invoice in two places.

A parent-company cost pool needs an additional layer of analysis. If the French subsidiary participates in a group research programme, the agreement should state whether the subsidiary is a buyer of a defined research operation, a contributor to a cost-sharing arrangement, a licensee of results, or simply receiving central management. These are not interchangeable descriptions. The file should identify the research question that benefits the French business, the work assigned to each entity, the allocation key and the ownership or use of results. A group-wide statement that “all entities support innovation” is too general for a French tax file.

Transfer pricing and CIR eligibility should be reconciled, but they are not the same test. A charge can be arm’s length and still not be an eligible research expense. Conversely, an operation can be technically eligible in principle while the price or allocation is challenged as excessive. Keep the intercompany agreement, functional analysis, cost pool, allocation calculations, deliverables and payment trail together. If the parent receives a cost-plus remuneration, identify the underlying qualifying expense and the mark-up separately; the statutory CIR base does not automatically follow the total invoice amount.

Grants, public funding and other support can also affect the amount retained. The group should record the source, beneficiary, project and period of every subsidy or funding stream. The French tax computation should then follow the rule applicable to that funding rather than assuming that a gross invoice is the eligible base. The official BOFiP guidance on research expenditure is a useful administrative reference alongside the statute, but the legal classification must still be made on the facts of the project.

B. What documents and tax filings prove the claim?

The proof file should be assembled while the project is running. The French tax administration can review the tax calculation, while research authorities can assess the reality and scientific or technical nature of the operations. Article L45 B of the French Tax Procedure Code (LPF, Livre des procédures fiscales) permits agents of the research ministry to verify the reality of the research allocation, while the tax administration remains responsible for the tax reassessment. Article R45 B-1 of the LPF sets out the role of agents appointed by the research ministry and the regional academic delegation for research and innovation (DRARI). The ministry’s technical-control process and review period should be anticipated when the file is assembled.

A serious file should allow a reviewer who was not present at the start of the project to understand what was unknown, what was attempted and what was learned. For every project, retain a short technical narrative covering:

• the product, process or system being developed and the starting state of knowledge;
• the scientific or technical uncertainty that could not be resolved by ordinary professional practice;
• the hypotheses, architecture choices, experiments, simulations, tests and iterations;
• the failures, unexpected results, changes in method and remaining limits;
• the people and external providers involved, with their roles and periods;
• the work products, source-control history, laboratory records, test reports, tickets or design documents; and
• the date on which the operation started, changed scope or ended.

The financial file should connect that narrative to the accounts. Keep payroll journals, employment or secondment agreements, social-charge records, project time reports, asset invoices, the fixed-asset register, depreciation schedules, subcontracting contracts, approval certificates, invoices, payment proofs and the calculation workbook. If a foreign parent supplies information, retain the original record and a clear English-to-French working explanation of the relevant accounting fields where that helps the reviewer. Consistent project codes across the French ledger and the parent’s reports are valuable evidence.

The following working table helps a foreign founder identify gaps before the annual declaration:

File component	Question it should answer	Typical weakness
Project sheet	What technical uncertainty and research method existed?	A commercial roadmap with no state-of-the-art or failed tests.
Personnel bridge	Which person worked on which qualifying task and for what period?	One hundred percent allocation for staff who also sell, install or support customers.
Asset file	Was the new asset directly assigned to research and correctly depreciated?	Claiming general production equipment or the full depreciation despite mixed use.
Provider file	Was the external body approved, and did it perform the defined operation?	An intercompany invoice with no approval proof, deliverable or technical report.
Group-pricing file	Why was the French company charged this amount and what benefit did it receive?	A broad cost pool that mixes shareholder costs, licences and research.
Tax bridge	How do the project costs become the amount reported on the return?	A return amount that cannot be reconciled to the French general ledger.

Timing is a frequent source of error for a foreign-owned company. The credit is calculated by reference to expenses incurred during the calendar year. In Conseil d’État, 2 June 2026, no. 506731, ICV, the decision quoted the rule in these words: “Quelle que soit la date de clôture des exercices et quelle que soit leur durée, le crédit d’impôt est calculé par référence aux dépenses exposées au cours de l’année civile.” That is an exact extract from the decision. A French subsidiary with a 30 June year-end therefore needs a calendar-year CIR schedule rather than a calculation that follows only its financial year.

For a company subject to French corporate income tax, the credit is used through the mechanism in Article 220 B of the CGI, which connects the CIR to corporate income tax through Article 199 ter B. The claim is reported using the relevant research tax form, including Form 2069-A-SD on the official impots.gouv.fr website. “Impots.gouv.fr” is the French tax administration’s official website. The company should also follow the associated electronic tax-return and corporate-income-tax procedures applicable to its filing profile, rather than sending a standalone spreadsheet to the group’s foreign tax team.

Article 199 ter B of the CGI provides the rules for using, carrying forward and in certain situations obtaining repayment of the credit. The official Article 199 ter B text should be checked for the relevant year and the company’s status. A company that has no immediate corporate-income-tax liability should not assume that the credit disappears, but it also should not promise an immediate cash refund without checking whether it falls within a statutory refund category. The tax return, accounting entry and cash-flow forecast should distinguish a credit carried forward from an amount that can be requested for repayment.

A rescript can reduce uncertainty before the claim is filed. Article L80 B of the LPF describes a written rescript route for a precise and complete factual situation. The request normally has to be made at least six months before the deadline for the relevant declaration, and the absence of a reasoned response within the statutory three-month period can have the legal effect provided by the text. The official Article L80 B wording should be read closely, including the separate route involving research authorities. The request should state the legal basis, factual assumptions and documents relied on, with no material ambiguity about the project or provider.

A rescript is not a replacement for the evidence file. It protects the position on the facts that were submitted. If the request describes a French team carrying out a defined experimental programme, but the project later becomes routine customer implementation or the parent changes the provider, the response does not automatically cover the new facts. The request should therefore include a precise project description, the state of knowledge, the uncertainties, the proposed methodology, the people and providers, the location, the cost categories and the accounting period. Keep the submitted version and all annexes with the annual claim.

Before filing, a foreign founder can use this sequence:

1. Confirm that the French entity is within the relevant Article 244 quater B tax scope and identify whether it is subject to corporate income tax.
2. Split the group programme into French internal work, approved external research and ordinary group services.
3. Test each project against the research definitions, recording the technical uncertainty and method rather than relying on job titles or marketing language.
4. Build a calendar-year cost schedule from the French payroll, asset register and invoices.
5. Check the location, approval, dependence relationship, three-times limit and €2 million or €10 million subcontracting ceiling for each outsourced operation.
6. Reconcile the CIR schedule with transfer pricing, VAT, grants, accounting and the parent’s reporting.
7. Ask for a rescript early when the project is material and the eligibility issue cannot be resolved from the official rules and guidance.
8. File the required French forms and preserve the complete technical and financial file for the control period.

For the control itself, remember the division of roles. The research ministry or the DRARI examines the reality and technical nature of the work; the tax administration determines the tax consequences and can reassess the credit. The company should answer both dimensions. A technically persuasive report with no payroll bridge is incomplete, and a perfectly reconciled ledger with no evidence of a research uncertainty is also incomplete.

Finally, the group should use exact language in its contracts and internal approvals. “The French subsidiary funds the parent’s innovation” is materially different from “the approved research body performs the identified experimental programme for the French subsidiary during the 2026 calendar year.” The second formulation can be tested against documents, people, results and payments. The first invites the reviewer to ask who actually carried out the operation and why the French company should receive the credit.

Conclusion

A foreign-owned French subsidiary is not excluded from the CIR because its shareholders or technical parent are abroad. The claim turns on the French company’s status, the scientific or technical reality of the operation, the qualifying nature and location of each expense, and the quality of the evidence. Internal payroll and directly assigned new research equipment can form the base when the records support the allocation. A parent-company or group-company invoice requires a separate subcontracting, approval, transfer-pricing and anti-double-counting analysis. The calendar-year rule, the 2069-A-SD filing, the corporate-income-tax mechanism and the possible rescript timetable should be planned before the accounts are closed.

The safest practical file is built as a single chain: technical uncertainty, work performed, person or provider, asset or invoice, accounting entry, annual calculation and tax return. A foreign founder preparing a French expansion can also review our France business legal hub and the related guidance on French corporate tax for a foreign-owned company before deciding whether the CIR question requires a project-level review.

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