FRANCE LAW AND PRACTICE Contributed by: Caroline Silberztein, Benoît Granel, Jean-Baptiste Tristram, Lionel Ochs and Laura Nguyên-Lapierre, Baker McKenzie
ultimately before the Supreme Administrative Court. The Supreme Administrative Court can overturn a decision of the Administrative Courts of Appeal only if it is grounded on a procedural error or an erroneous interpretation of law; the Supreme Administrative Court does not con - sider the facts. In principle, the decisions of the administrative courts are executable. A stay of execution can only be granted when the court considers that the execution of the decision would damage a party in a manner that would be difficult to sub - sequently remedy. 14. Judicial Precedent 14.1 Judicial Precedent on Transfer Pricing Precedents on TP in France are increasingly important. 14.2 Significant Court Rulings Burden of Proof In a Novartis case (CAA Paris, 25 June 2008, No 06PA02841; final), the FTA regarded as exces - sive the price paid by a French company to its Swiss parent for an active ingredient used by the French company to manufacture the finished products. The FTA relied on the fact that the resulting allocation of the combined profit mar - gin of the two companies was disproportionate to the costs incurred by each of them. The Court did not support the FTA, noting that it had failed to compare the TP paid by the French entity with the price paid for comparable products sold by similar enterprises, and that it had not produced any analysis concerning the nature of the prod - uct or its production and commercialisation conditions, which would support an allocation based on relative costs incurred.
In a Man Camions et Bus case (CAA Versailles, 5 May 2009, No 08VE02411; final), the Court rejected the reassessment made by the FTA because it was based on European compara - bles, without demonstrating that the markets where they operated were comparable to the French market in which the taxpayer operated, while the taxpayer argued that the markets were not comparable, without producing a functional analysis for the proposed comparables. In a Nestlé Entreprises case (CAA Versailles, 27 March 2012, No 10VE01171; final), the Court upheld the reassessments made by the FTA con - cerning the price at which mineral water bottles were sold by the French entity to its affiliated Japanese distributor. The FTA noted that the TP led the Japanese distributor to earn a 33% net profit margin while the other affiliated distribu - tors were attributed a 6% net profit margin. The taxpayer argued that the 33% net profit mar - gin was a temporary situation and that the FTA did not establish why it would not be at arm’s length. The FTA produced comparables to sup - port an arm’s length range between 7.5% and 9.5%, adjusted up to 19% to take into account additional functions performed by the Japanese distributor as well as the higher resale price of the water bottles in the Japanese market. The Court regarded the FTA analysis as valid. In a Société Unilever France Holdings case (CAA Versailles, 16 May 2013, No 11VE03123; final), the acceptability of a cost-plus determi - nation based on standard manufacturing costs, which were lower than the actual manufacturing costs of the French plant, was in question. The Court considered that the FTA could not adjust the price of the manufactured products without considering market conditions. In this case, the Court did not regard the use of standard rather than actual costs as an abnormal management
154 CHAMBERS.COM
Powered by FlippingBook