Recently, the Supreme Administrative Court made a decision of a case “France vs Ferragamo France” against of Administrative Court. On 23 November 2020, the Administrative Court made a decision in this case in favour of Ferragamo and dismissed the assessment. According to the Court, the tax administration has not demonstrated the existence of an advantage granted by Ferragamo France to Salvatore Ferragamo SPA, nor the amount of this advantage.
In this case, Ferragamo France received a 25 percent gross margin for its services as a distributor in France. However, the French tax authorities determined that 19 third-party distributors’ operating expense to sales ratios were lower than the ratio applied for Ferragamo France. Although the French sales company suffered losses from 1996 to 2009, the Administrative Court ruled against the tax authorities on the grounds that the Italian parent company did not charge the French sales company any trademark fees and that the French subsidiary was profitable from 2010 to 2015.
The French Supreme Administrative Court ruled in favor of the tax authorities and against the Administrative Court. According to the Supreme Administrative Court, the French distributor incurred higher operating costs than the third-party sellers who were supposed to add value to the Italian brand in this luxury goods sector.
