A French subsidiary, SAS Groupe Lagasse Europe, of the Canadian Legasse Group had paid service fees to another Canadian group company, Gestion Portland Vimy. The French tax authorities held that the basis for the payments of service fees had not been established, and that there was no benefit to the French subsidiary. The payments constituted an indirect transfer of profits within the meaning of the ‘article 57 of the general tax code; Excerps from the judgement of the Court: “11. Under the terms of article 57 of the general tax code, applicable in matters of corporate tax under article 209 of the same code: “For the establishment of income tax due by the companies which are dependent or have control of companies located outside of France, the profits indirectly transferred to the latter, either by increasing or decreasing the purchase or sale prices, or by any other means, are incorporated into the results recognized by the accounts (…) “. These ... Read more

In the French Nestlé water case, the following arguments were made by the company: The administration, which bears the burden of proof under the provisions of Article 57 of the General Tax Code, of paragraphs 38, 39 and 42 of the Instruction 13 l-7-98 of 23 July 199 8 and case law, does not establish the presumption of indirect transfer of profits abroad that would constitute the payment of a fee to the Swiss companies A … SA, company products A … SA and Nestec SA. The mere fact that the association of the mark A … with the mark Aquarel also benefits company A … SA, owner of the mark A …, does not allow to prove the absence of profit and thus of consideration for NWE. The latter company also benefited from the combination of the two brands. Advertising alone are not enough to characterize an indirect transfer of profits abroad; in any case, the administration does not ... Read more