Am I allowed to have employees who are fiscally resident outside the country of the Prime Contractor or Subcontractor?

Case 1: Employees of a Company Recognized as a “State” Entity by ESA
If a company is recognized as a “State” Entity by the European Space Agency (ESA), employees who are directly paid by this company can charge hours for their work.

Case 2: Employees Paid by a Foreign Subsidiary
If the employees are paid by a subsidiary of the company located in another country, they cannot charge hours directly. In this situation, their work can only be considered as an external service and is permissible only if it does not involve key activities or key personnel.