The French tax administration (FTA) published some decisions issued by the French courts and an administrative guidance regarding the arm’s length nature of intragroup financial transactions.
Court’s decisions:
In the last quarter of 2020, the Paris Administrative Court of Appeal and the French Supreme Administrative Court issued several decisions in the following cases: (Case No.18PA01026, Case No. 428522, Case No. 433723 and Case No. 18PA02715).
The above cases relate to the deductibility of intra-group interest expenses. In general, these decisions confirm that detailed and meaningful economic analyzes must be viewed as relevant evidence for the arm’s length of inter-company interest rates.
Administrative guidance
On 27 January 2021, the French tax administration published a series of eight “methodological notes” covering a broad range of technical aspects in relation to the determination of an appropriate interest rate (primarily from an Article 212-I-a perspective). The French tax administration had in practice set such high standards for establishing such proof that tax practitioners referred to this as “impossible proof.”
Finally, in the Court decisions in the Studialis, WB Ambassador, and BSA cases, the Paris appellate court and the French Supreme Administrative Court held in favor of the taxpayers in each case.
