SARL Cosi Immobilier, is a wholly owned subsidiary of the Swiss company Compagnie de Services Immobiliers SA (Cosi SA). The group is engaged in sale of properties and real estate.
Following a tax audit covering the FY 2011 and 2012, an assessment of additional corporate income tax was issued, together with penalties. According to the tax authorities service fees paid by SARL Cosi to its Swiss parent (50% of the the sales commission received) for online marketing of properties and real estates located in France had not been at arm’s length.
The company requested the administrative court of Lyon to discharge the assessments, but this request was rejected by the court in a judgement issued 11 December 2018. This decision was then appealed by the company to the Supreme Administrative Court.
Judgement of the Supreme Administrative Court
The Appeal of Cosi Immobilier was rejected by the Court.
“In the present case, the company Cosi Immobilier concluded on 17 August 2010 a service agreement with the company Cosi SA in order, according to its preamble, to allow SARL Cosi Immobilier to promote in Switzerland its portfolio of properties located in France thanks to the development by Cosi SA of a quality internet platform, the use of qualified personnel and the provision of its network of prospects. Article 1 of this agreement stipulates that its purpose is to provide an IT platform for the purpose of putting the properties online, the promotion and marketing of the properties, as well as the acquisition and referral of clients. The exhaustive list of services that Cosi SA undertakes to provide, as set out in the appendix, includes IT, advertising, telephone, financial and banking, commercial, marketing and training services. As Cosi Immobilier acknowledges in its written submissions, the main purpose of the services thus provided for Cosi SA is to bring in new prospects in order to find buyers, consistent with the level of remuneration contractually provided for, corresponding, in accordance with the practices of the profession in the event of two agencies sharing the search mandate and the sales mandate, to 50% of the commission excluding tax received by the applicant company. However, this remuneration is due by the applicant company for each sale concluded before a notary, regardless of the origin of the purchaser.”
“In order to qualify the remuneration paid on the occasion of certain transactions as an indirect transfer of profits, the administration first noted, without being contradicted on this point, that certain sales, listed exhaustively in appendices 1, 2 and 3 of the rectification proposal, gave rise to both the repayment to Cosi SA of 50% of the commission, and also to the payment to employees or partners of Cosi Immobilier of part of the commission contractually owed when the interested party provided both the sales mandate and the search mandate. The administration also noted that some sales had resulted in a sharing of the commission with third-party agencies. By merely producing a credit note from Cosi SA for commissions for 2012, which does not specify which sales it relates to, Cosi Immobilier does not usefully dispute that it received only zero or even negative remuneration on certain sales. It is not disputed either that other services contractually provided for by Cosi SA, such as telephone canvassing, were not carried out either. Finally, it is clear from the information transmitted by the Swiss tax authorities, which has not been contradicted either, that Cosi SA, which was dissolved in 2008, had only been in business for three months when Cosi Immobilier was created, and therefore could not have had a real network in Switzerland, that its turnover over the years in question consisted almost exclusively of commissions paid by its subsidiary, and that it only declared losses for these same years, that it does not have any premises in Switzerland, being domiciled at the accounting firm where its manager, who is also the manager of the subsidiary, works, that it only spent between 0.25 and 4% of its turnover on advertising and marketing during 2011 and 2012, and that its balance sheet does not show any computer equipment. The tax authorities have thus established the excessive nature of the remuneration accepted by Cosi Immobilier in relation to the reality of the services allegedly provided by Cosi SA, and consequently the reality of a practice falling within the provisions of Article 57 of the General Tax Code.”
“The company Cosi Immobilier does not provide proof that the advantage thus granted is justified by favourable considerations for its own operations, merely relying on computer referencing tasks carried out on Cosi SA’s website, even supposing that they could not have been carried out by its own employees, whose agreement of 17 August 2010 provided for training in these tasks, a few e-mails between certain buyers and Cosi SA, or even mailing files, which in any case include a large number of messages from the independent service provider working with Cosi Immobilier, and not from employees of Cosi SA. The tax authorities also point out, without any useful contradiction, that the proportion of Cosi Immobilier’s clients established in Switzerland does not exceed 10%.”