The French company SMAP carries out activities in the area of advertising management and organisation of trade fairs.
Following an audit of the company for FY 2008 to 2011 and assessment was issued where deduction of costs for certain intra group “services” had been denied, resulting in additional value added tax, corporate income tax surcharges, apprenticeship tax and business value added tax.
The company held that the tax administration had disregarded fiscal procedures, and that the reality of the services – and deductibility of the costs – cannot be disregarded on mere presumptions.
Decision of the Court
The Appeal of SARL SMAP was rejected by the Court.
“Firstly, the administration notes that by virtue of a Lebanese legislative decree n° 46 of 24th June 1983, companies governed by Lebanese law … carrying out their essential activities outside the national territory are considered as offshore companies and as such benefit from a privileged tax regime. In particular, Article 4 of this legislative decree exempts these companies from the tax on the annual profits of joint stock companies. As mentioned in point 6, the activities of APCOM, as they are only covered by the 2004 contracts signed with SMAP SARL, concern administrative and financial services and commercial representation activities for companies not domiciled in Lebanon, and are therefore subject to the provisions of the Legislative Decree No. 46 of 24 June 1983. By merely maintaining that the company APCOM paid taxes in Lebanon, without producing any documents in support of its allegations, the applicant did not usefully contest the elements put forward by the administration. The latter must, therefore, be regarded as establishing that APCOM benefits from a privileged tax regime in Lebanon. It was therefore not required to establish the existence of a link of dependence between the two companies.”
“…the claimant has not produced any documents to establish the reality of the services that APCOM performs on behalf of SMAP. Finally, the APCOM supplier account opened in the accounts of SMAP SARL functions as a partner’s current account. A transfer of 25,982 euros to SMAP was also entered there under the heading “loan repayment”, without any explanation being given by the applicant. Under these conditions, the administration must be considered as having produced elements likely to establish that the sums paid by SMAP SARL to APCOM constituted pure generosity granted in an interest other than that of the applicant company.”
“…in order to establish the link of dependence between the applicant company and SMAP EXPO SL, the administration relies on the circumstance that the two companies shared the same director. Moreover, it is clear from the terms of the two proposed corrections that the administration also noted that the Spanish company, a sister company to SMAP EXPO S.L., had been the applicant company’s director.”
“SARL SMAP, which does not have the material and human resources necessary to carry out its activity of organising trade fairs in Spain, relies on those of the applicant company. In these circumstances, the administration must be considered as establishing the link of dependence between the applicant and SMAP EXPO SL.”
“As stated in paragraph 7, there is no evidence to establish the reality of the services which would have been provided by SMAP EXPO SL to SMAP SARL. Moreover, the applicant does not contest the transfer of profits to SMAP EXPO SL.”
“It follows from what has just been said in the preceding points that the plea alleging that the administration has disregarded the provisions of Article 57 of the General Tax Code must be dismissed.”
“It follows from all of the foregoing that SMAP SARL is not entitled to argue that the Montreuil Administrative Court wrongly rejected its claims in the contested judgment”.SMAP CAA de VERSAILLES, 1ère chambre, 02_03_2021, 19VE01161, Inédit au recueil Lebon