Following a restructuring of the Italien Piaggio group, SAS Piaggio France by a contract dated January 2 2007, was changed from an exclusive distributor of vehicles of the “Piaggio” brand in France to a commercial agent for its Italian parent company.
The tax authorities held that this change had resulted in a transfer without payment for the customers and applied the provisions of article 57 of the general tax code (the arm’s length principle). A tax assessment was issued whereby the taxable income of SAS Piaggio France was added a profit of 7.969.529 euros on the grounds that the change in the contractual relations between the parties had resultet in a transfer of customers for which an independent party would have been paid.
The Judgment of the Court
The court helt in favor of the tax authorities and added an additional profit of 7.969.529 to the taxable income of the SaS Piaggio France for the transfer of customers to the Italian parent company.
SAS Piaggio France had until 2007 an exclusive distribution activity in Franch of vehicles of the brand “Piaggio”, which were bought, imported and then resold in its own name to French dealers. For this activity, SAS Piaggio France had developed its own strategy for the French market. It has established and managed a vast network of dealers for which it determined the volumes and models to buy as well as its own commercial policy in terms of pricing and after-sales service. It also and assumed the risks of managing its stock of piaggio products of which it was the owner as well as the commercial risks resulting from possible unpaid or unsold goods.
Under these conditions, SAS Piaggio France must be regarded as having created its own customer base – regardless of the strong reputation of the “Piaggio” brand in France – by the network of dealers and the corresponding business. In holding that the transformation of SAS Piaggio France from an exclusive distributor into a simple commercial agent for Piaggio and C SpA did not entail any transfer of customers that should be compensated, the judgment from the court administrative appeal was inexact in the legal characterization of the facts.