France vs SAP France, December 2021, CAA de VERSAILLES, Case No. 20VE01009

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SAP AG (now SAP SE) is a German multinational software corporation that develops enterprise software to manage business operations and customer relations. The company is especially known for its ERP software.

SA SAP France, a 98% subsidiary of SA SAP France Holding, itself wholly owned by the German group, had deposited funds under a Cash Management Agreement as sight deposits carrying an interest of 0%.

Following an audit for the financial years 2012 and 2013, two assessment proposals were issued in December 2015 and November 2016, relating in particular to the 0% interest rate charged on the cash deposits. The tax authorities had added interest to SA SAP France’s taxable income calculated by reference to the rate of remuneration on sight deposits.

SA SAP France contested the adjustments and furthermore requested the benefit of the reduced rate of corporation tax on income from industrial property, pursuant to Article 39 of the French General Tax Code, with regard to the royalties from the licensing agreements relating to Business Object products and Cartesis solutions.

SA SAP France Holding, the head of the group is appealing against the ruling of 30 January 2020 by which the Montreuil Administrative Court rejected its requests for the reconstitution of its overall tax loss carry-forward in the amount of EUR 171,373 for 2012, 314,395 in duties for 2013 and the additional contribution to corporate income tax on the amounts distributed for 2012 and 2013, for amounts of €5,141 and €14,550 respectively, and, in application of the reduced tax rate, the refund of an overpayment of corporate income tax and additional contributions for €27,461,913 for the years 2012 to 2015.

Judgement of the Court of Appeal

In regards of the added interest on the deposited funds under a Cash Management Agreement the Court decided in favor of the tax authorities.

“In order to reintegrate into the taxable results of SA SAP France the interest at the monthly rate for sight deposits on the sums it made available to SAP AG under a cash management agreement concluded on 17 December 2009 between the parties, the department noted that SAP AG, now SAP SE, a company under German law, held 100% of SA SAP France Holding, SA SAP France’s parent company, and that the EONIA rate for interbank relations, reduced by 0.15% stipulated in the agreement, had led to a total absence of remuneration for the sums made available to the central treasury by SA SAP France as of August 2012, for very significant amounts ranging from 132 to 432 million euros.

In these circumstances, the administration establishes the existence of an advantage consisting of the granting of interest-free advances by SA SAP France to the company SAP AG, located outside France, which controls it through SA SAP France Holding.

If the latter argues that the rate stipulated is a market rate whose evolution is independent of the control of the parties, and that it was capped at 0 % whereas a strict application of the agreement would have led to a negative rate, these circumstances are inoperative, since this rate is unrelated to the remuneration to which SA SAP France could have claimed if it had placed its cash surpluses with a financial institution.

Furthermore, by maintaining that the investment of its funds with SAP AG is particularly secure and that it enables it to obtain immediate and unconditional financing from the central treasury at the rate of EONIA + 30%, the applicant company does not justify an interest of its own which can be regarded as a consideration, since it is common ground that its situation vis-à-vis the central treasury was constantly in credit for very substantial amounts which greatly exceeded its working capital requirements.

Finally, the monthly rate for sight deposits of between 0.15 and 0.18% applied by the department corresponds to the interest rate which SA SAP France could have obtained from a financial institution and the applicant does not propose a more relevant comparable.

It follows that the administration establishes the existence during 2012 and 2013 of a transfer of profit, within the meaning of the provisions of Article 57 of the General Tax Code, from SA SAP France to the company SAP AG located outside France, for the amounts of EUR 171 373 in 2012 and EUR 484 986 in 2013, which the administration reintegrated into the results of SA SAP France.”


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