France vs SAS Wheelabrator Group, July 2019, Conseil d’Etat Opinion, No 429426

« | »

In an Opinion issued on 10 July 2019 on request from the Administrative Court of Versailles, the Conseil d’Etat states as a principle that the arm’s length nature of intra-group interest rate can be demonstrated by reference to comparable unrelated transactions, when these loans constitutes realistic alternatives to the intra-group loan.

Excerpt from the Opinion
“…
5. The rate that the borrowing enterprise could have obtained from independent financial establishments or organizations under similar conditions means, for the purposes of these provisions, the rate that such establishments or organizations would have been susceptible, account given its own characteristics, in particular its risk profile, to grant it for a loan with the same characteristics under arm’s length conditions.
6. This rate cannot, having regard to the difference in nature between a loan from a financial institution or body and financing by bond issue, be that which this enterprise would itself have been able to serve for subscribers if it had chosen to finance itself by issuing bonds rather than taking out a loan.
7. The borrowing enterprise, which bears the burden of proving the rate that it could have obtained from independent financial institutions or organizations for a loan granted under similar conditions, has the option of providing this proof by any way. As such, to assess this rate, it may if necessary take into account the yield on bond loans issued by companies in comparable economic conditions, when these loans constitute, in the hypothesis considered, a realistic alternative to a intra-group loan.
8. This notice will be notified to the Versailles Administrative Court, to the simplified joint stock company Wheelabrator Group and to the Minister for Public Action and Accounts. It will be published in the Official Journal of the French Republic.”

 
Click here for translation

 

joe_20190713_0161_0104

Related Guidelines

Leave a Reply

Your email address will not be published. Required fields are marked *