FRANCE LAW AND PRACTICE Contributed by: Caroline Silberztein, Benoît Granel, Jean-Baptiste Tristram, Lionel Ochs and Laura Nguyên-Lapierre, Baker McKenzie
decision for the French manufacturer, as it ena - bled it to cover its fixed costs pending better plant efficiency. In another Nestlé Entreprises case (CAA Ver - sailles, 18 February 2014, No 11VE03460; final), the Court ruled that while the company Aquarel Europe’s association of the brand Nestlé with the brand Aquarel did not confer any benefit to the company, due to the costs of the necessary investments and low sales, this was insufficient to demonstrate the lack of use value of the Nestlé brand in the market penetration phase. Thus, the Court considered that the lack of prof - itability of the exploitation of a brand does not necessarily lead to the conclusion that it lacks use value and, therefore, invalidated the FTA’s reassessments. In a Philips France SAS case (CE, 18 Septem - ber 2018, No 405779; final), the French company provided R&D services to its Dutch parent com - pany using a cost-plus method. The question was, in determining the cost base, whether the company should have deducted the subsidies it received from the French state for business investment projects. The FTA considered that the deduction for the calculation of the cost base constituted a price reduction and there - fore a non-arm’s length transfer of profits. The Supreme Court ruled in favour of Philips, con - sidering that the deduction made by a company of subsidies it had received from the state for R&D projects cannot be considered as allowing, by itself and independently from the level of the price resulting from this deduction in accord - ance with the calculation method provided by the contract, presumption of the existence of a transfer of profits abroad. On this basis, the Supreme Administrative Court decided that the FTA had not met its burden of proof to establish the existence of a transfer of profits.
In a Ferragamo France case (CE, 23 Novem - ber 2020, No 425577, confirmed by CAA Paris, 30 June 2022, No 20PA03601), the Supreme Administrative Court ruled that flagship expens - es incurred by a French distributor contributing to the value of the brand owned by its foreign parent may in certain cases constitute an indi - rect transfer of profits. Analysing the salary costs and certain expenses (particularly rent) borne by the French distributor, the FTA observed that the costs were “noticeably higher” than those incurred by the independent companies identi - fied. As a consequence, the FTA issued a TP reassessment, considering that the surplus of expenses borne by Ferragamo France was an advantage granted to its Italian parent company, owner of the trade mark, and that this surplus was not compensated by the higher gross mar - gin granted to Ferragamo France. The Supreme Court overturned the decision of the Court, which was in favour of the taxpayer, consider - ing as follows. Firstly, the FTA had established the existence of an advantage granted to an associated enter - prise given that “supporting additional expenses of salaries and rents compared to independent companies was aimed at increasing the value of the Italian brand in a strategic market in the lux- ury goods sector” . Secondly, Ferragamo France did not evidence that it received any considera - tion for the advantage in question by merely asserting that it was profitable between 2010 and 2015. Interquartile Range In a TCL Belgium case (CAA Versailles, 29 December 2016, No 14VE02126; final), the Court ruled that a reassessment can only be performed if the price of a transaction (or the margin of the tested company, depending on the method applied) is outside of the interquar -
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