TPcases

Database of Transfer Pricing Case Laws

France vs Willink SAS, December 2022, Conseil d’Etat, Case No 446669

Posted on December 22, 2022 | By Courts of France | No comments

Category: Comparability Analysis, Financial Transactions | Tag: Comparability, Convertible bonds, Credit rating, Credit rating tools, Interest rate, Intra-group loan, Loan, Riskcalc

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In 2011, Willink SAS issued two intercompany convertible bonds with a maturity of 10 years and an annual interest rate of 8%.

The tax authorities found that the 8% interest rate had not been determined in accordance with the arm’s length principle.

Willink appealed, but both the Administrative Court and later the Administrative Court of Appeal sided with the tax authorities.

Judgment of the Supreme Court

The Conseil d’Etat overturned the decision and ruled in favour of Willink SAS.

The court found that RiskCalc could be used to determine a company’s credit rating for transfer pricing purposes in a sufficiently reliable manner, notwithstanding its shortcomings and the differences in the business sectors of the comparables.

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Related Guidelines

TPG2022 Chapter X paragraph 10.95Whereas it is unlikely that an MNE group’s average interest rate paid on its external debt meets the comparability requirements to be considered as an internal CUP, it may be possible to identify potential comparable loans within the borrower’s or its MNE group’s financing with an independent lender as the...

TPG2022 Chapter X paragraph 10.92In the search for comparability data, a comparable is not necessarily restricted to a stand-alone entity. In examining commercial loans, where the potentially comparable borrower is a member of an MNE group and has borrowed from an independent lender, provided all other economically relevant conditions are sufficiently similar, a loan...

TPG2022 Chapter X paragraph 10.67There may be special circumstances, such as in the case of start-up entities, or those that have recently been part of a merger, that may have an impact on the credit rating of a group entity. These special situations should be taken into consideration....

TPG2022 Chapter X paragraph 10.98One consideration to be kept in mind with the cost of funds approach is that it should be applied by considering the lender’s cost of funds relative to other lenders operating in the market. The cost of funds can vary between different prospective lenders, so the lender cannot simply charge...

TPG2022 Chapter X paragraph 10.97In the absence of comparable uncontrolled transactions, the cost of funds approach could be used as an alternative to price intra-group loans in some circumstances. The cost of funds will reflect the borrowing costs incurred by the lender in raising the funds to lend. To this would be added the...

TPG2022 Chapter X paragraph 10.96In considering arm’s length pricing of loans, the issue of fees and charges in relation to the loan may arise. Independent commercial lenders will sometimes charge fees as part of the terms and conditions of the loan, for example arrangement fees or commitment fees in relation to an undrawn facility....

TPG2022 Chapter X paragraph 10.94When considering issues of comparability, the possibility of internal CUPs should not be overlooked....

TPG2022 Chapter X paragraph 10.93Arm’s length interest rates can also be based on the return of realistic alternative transactions with comparable economic characteristics. Depending on the facts and circumstances, realistic alternatives to intra-group loans could be, for instance, bond issuances, loans which are uncontrolled transactions, deposits, convertible debentures, commercial papers, etc. In the evaluation...

TPG2022 Chapter X paragraph 10.91The arm’s length interest rate for a tested loan can be benchmarked against publicly available data for other borrowers with the same credit rating for loans with sufficiently similar terms and conditions and other comparability factors. With the extent of competition often present within lending markets, it might be expected...

TPG2022 Chapter X paragraph 10.87A guarantee from another party may be used to support the borrower’s credit. A lender placing reliance on a guarantee or guarantees would need to evaluate the guarantor(s) in a similar way to that in which it evaluates the original borrower. For the lender to take a guarantee into account...

Supplemental Guidance

France vs Willink SAS, September 2020, CAA de PARIS, Case No 20PA00585Willink SAS issued two intercompany convertible bonds in 2011 at an 8% annual interest rate. The French tax authorities challenged the rate as exceeding the arm's length standard. Willink submitted a 2020 comparability study using Moody's RiskCalc software, but the Paris Court of Appeal dismissed the appeal in 2020, upholding...

France vs Willink SAS, May 2024, CAA Paris (remanded), Case No 22PA05494Willink SAS issued two intercompany convertible bonds at an 8% annual interest rate, which French tax authorities challenged as exceeding the arm's length rate. After the Conseil d'État endorsed RiskCalc as a sufficiently reliable credit rating tool and remanded the case, the Paris Administrative Court of Appeal annulled the tax...

France vs GEII Rivoli Holding, April 2024, Conseil d’État, Case No 471139 (ECLI:FR:CECHR:2024:471139.20240405)Following a tax audit covering FY 2013 and 2014, French authorities challenged GEII Rivoli Holding's deduction of intra-group interest at 5.08%, above the statutory safe harbour rate of 2.79%. The company justified the rate using Moody's RiskCalc and S&P corporate bond yield curves. The Conseil d'État rejected the RiskCalc approach...

Italy vs GI Group S.p.A., May 2021, Supreme Court, Case No 13850/2021GI Group S.p.A. granted a non-interest-bearing loan to a related Hong Kong entity to fund a Chinese acquisition. Italian tax authorities imputed an arm's length interest rate and added the amount to taxable income. After the Regional Tax Commission set aside the assessment, Italy's Supreme Court reversed that decision in...

Colombia vs Monómeros Colombo Venezolanos SA, May 2025, Supreme Administrative Court, Case No. 08001-23-33-000-2019-00690-01 (25943)A Colombian company had interest deductions on loans from a British Virgin Islands related party disallowed after tax authorities found its transfer pricing documentation deficient. The taxpayer relied solely on US corporate bond comparables, which authorities rejected as insufficiently similar. Colombia's Supreme Administrative Court upheld the adjustments in 2025, finding...

France vs Montlaur Sakakini, Oct 1995, Administrative Court of Appeal, No 95LY00427A French company challenged a tax authority adjustment that set arm's length interest rates on intra-group advances at 10–12%, arguing the correct rate was 4.5%. The Lyon Administrative Court of Appeal sided with the taxpayer in 1995, finding that the rates cited by the tax authority — based on bank...

France vs Studialis, October 2020, Administrative Court of Appeal, Case No 18PA01026Studialis issued bonds to foreign group partners at 10% interest, which French tax authorities challenged as exceeding the Article 212 CGI safe harbour rate. The authorities rejected all supporting evidence, insisting only on contemporaneous loan offers. The Paris Administrative Court of Appeal sided with Studialis in 2020, finding that independent...

France vs BSA Finances, December 2020, Supreme Administrative Court , Case No 433723BSA Finances received five intra-group loans from a Luxembourg affiliate carrying rates between 3.98% and 6.196%. French tax authorities disallowed excess interest above average bank lending rates under Article 212(I). The French Supreme Administrative Court overturned the Court of Appeal's 2019 ruling, finding that RiskCalc-supported rates satisfied the arm's length...

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France vs Willink SAS, December 2022, Conseil d’Etat, Case No 446669

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