FRANCE LAW AND PRACTICE Contributed by: Caroline Silberztein, Benoît Granel, Jean-Baptiste Tristram, Lionel Ochs and Laura Nguyên-Lapierre, Baker McKenzie
autonomy, the branch had not developed a dis - tinct customer base, thus precluding any trans - fer between the branch and its head office as alleged by the FTA. Financing In a Société Wheelabrator Group case (CE, 10 July 2019, No 429426 and 429428; final), the Supreme Administrative Court confirmed the reference to the arm’s length principle, stat - ing that “the rate that the borrowing company could have obtained from independent financial institutions or organisations under similar condi- tions is understood, for the application of these provisions, as the rate that such institutions or organisations would have been likely to grant it, taking into account its own characteristics, in particular its risk profile, for a loan with the same characteristics under arm’s length conditions” . It was also confirmed, in the opinion of the advo - cate general in this case, that the comparative reference intended by the legislator is the arm’s length principle as applied in TP. Finally, the Court pointed out that the borrowing company, which has the burden of proving the rate it could have obtained from independent financial insti - tutions or organisations for a loan granted under similar conditions, may provide this proof by any means. To assess this rate, it may, where appro - priate, “take into account the yield on bonds issued by undertakings in comparable economic circumstances, where such bonds constitute a realistic alternative to an intra-group loan in the circumstances under consideration” . In a BSA Finances case (CE, 11 December 2020, No 433723), the Supreme Administrative Court ruled in favour of the company, specifying that a study of a borrower’s creditworthiness should not be systematically rejected on the grounds that the study was based on commercial soft - ware like RiskCalc, particularly insofar as the
software is fed by the company’s own data and is based on sector-specific comparative ratios. This decision was recently confirmed by the CAA of Paris in the Willink case (CAA, 17 May 2024, No 22PA05494; final). The Court also concluded that the arm’s length nature of an interest rate can be demonstrated by breaking down the interest rate into several components. In an APEX Tool case (CE, 29 December 2021, No 441357), the Supreme Administrative Court ruled that the identified comparable financial transactions do not need to be from the same industrial sector as the tested party insofar as they have the same creditworthiness. The French Supreme Administrative Court also stated that, notably, the creditworthiness of the borrower must be demonstrated considering the financial situation of the borrower and its subsidiaries – ie, consolidated account at the level of the bor - rower. 15. Foreign Payment Restrictions 15.1 Restrictions on Outbound Payments Relating to Uncontrolled Transactions There are no specific rules, such as foreign exchange controls, restricting outbound pay - ments in France.
15.2 Restrictions on Outbound Payments Relating to Controlled Transactions
There is no specific rule restricting outbound payments, but France has specific rules limiting the deductibility of royalty payments or interest payments to controlled entities.
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