Transfer price | France | 2022 | German multinational software corporation
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France | 2022 | Conseil d’État | Case No. 461639
Council of State, 8th - 3rd joint chambers, 20/09/2022, 461639
Council of State - 8th - 3rd joint chambers
- N° 461639
- ECLI:FR:CECHR:2022:461639.20220920
- Mentioned in the tables of the Recueil Lebon
Reading of Tuesday 20 September 2022
Rapporteur
Mr François-René Burnod
Public Reporter
Mr Romain Victor
Lawyer(s)
SCP CELICE, TEXIDOR, PERIER
Full text
FRENCH REPUBLIC
IN THE NAME OF THE FRENCH PEOPLE
Having regard to the following procedure:
The public limited company (SA) SAP France Holding has asked the Montreuil Administrative Court to restore its overall deficit in the amount of 171 373 euros for the year 2012, to declare the discharge of the additional corporate tax contributions to which it was subject in respect of the financial year ended in 2013, 27,461,913 in corporate income tax and additional contributions for the years 2012 to 2015. By judgment no. 1804944 of 30 January 2020, this court rejected its claim.
By judgment No. 20VE01009 of 17 December 2021, the Versailles Administrative Court of Appeal granted SAP France Holding a discharge of the additional corporate income tax contributions for distributed income to which it was liable for the financial years 2012 and 2013, reversed the judgment of the administrative court to this extent and rejected the remainder of its appeal.
By a summary appeal and a supplementary memorandum, registered on 17 February and 17 May 2022 with the Secretariat of the Litigation Division of the Council of State, the company SAP France asked the Council of State:
1°) to annul Article 3 of this judgment;
2°) to charge the State the sum of 5,000 euros under Article L. 761-1 of the Code of Administrative Justice.
Having regard to the other documents in the file;
Having regard to:
- the general tax code and the book of tax procedures;
- the code of administrative justice;
After having heard in public session:
- the report of Mr François-René Burnod, auditor,
- the conclusions of Mr. Romain Victor, public rapporteur;
The floor having been given, after the conclusions, to SCP Célice, Texidor, Perier, lawyer for the company SAP France Holding;
Considering the following:
- It is clear from the documents in the file submitted to the judges of the court of first instance that SAP France is 98% owned by the limited company (SA) SAP France Holding, whose capital is entirely controlled by the German company SAP AG. On 17 December 2009, SAP France entered into a centralised cash management agreement with SAP AG, under which it deposited its cash surpluses with the German company, which were remunerated on the basis of an interest rate equal to the Euro OverNight Index Average (EONIA) interbank reference rate less 0.15 points. During 2012 and 2013, the application of this formula resulted in a negative remuneration due to the evolution of the EONIA, and the parties to the cash management agreement agreed to set this rate at 0%. Following an audit of SAP France's accounts for the financial years ending in 2012 and 2013, the tax authorities questioned the normal nature of this zero remuneration and reintegrated the profits which they considered as indirectly transferred to SAP AG. In a judgment of 7 November 2019, the Montreuil Administrative Court rejected the request of SAP France Holding, the head of the integrated tax group to which SAP France belongs, for the reconstitution of its overall loss carry-forward in the amount of EUR 171,373 in respect of the financial year ending in 2012, the discharge of the additional corporate tax contributions payable by it in the amount of EUR 314,395 in respect of the financial year ending in 2013 and the additional contribution on distributed income in the amount of EUR 5,141 in 2012 and EUR 14,550 in 2013, and, in application of the reduced tax rate from which it considered it was benefiting, the refund of an overpayment of corporate tax and additional contributions in the amount of EUR 27,461,913 in respect of these two financial years. SAP France Holding is appealing to the Court of Cassation against the judgment of 17 December 2021 by which the Versailles Administrative Court of Appeal, after granting it a discharge of the additional contributions to corporation tax in respect of distributed income to which it was liable in respect of the financial years ended in 2012 and 2013, rejected the remainder of the submissions of the appeal it had lodged against this judgment.
- Under the terms of Article 57 of the same code: "For the purposes of determining the income tax due by companies that are dependent on or control companies located outside France, the profits indirectly transferred to the latter, either by way of an increase or decrease in purchase or sale prices, or by any other means, are incorporated into the results shown in the accounts. The same procedure shall be followed in respect of undertakings which are dependent on an undertaking or a group which also controls undertakings situated outside France (...) In the absence of precise information for making the adjustments provided for in the first, second and third paragraphs, the taxable income shall be determined by comparison with that of similar undertakings normally operated. It follows from these provisions that, when it finds that the prices charged by an enterprise established in France to a foreign enterprise which is related to it - or those charged to it by this foreign enterprise - are lower - or higher - than those charged by similar enterprises normally operated, In the event that the charges levied in France by a related foreign company - or those invoiced to it by that foreign company - are lower - or higher - than those levied by similar companies operating normally, i.e. at arm's length, the administration must be considered to have established the existence of an advantage which it is entitled to reintegrate into the results of the French company, unless the latter can prove that this advantage had at least equivalent counterparts for it. In the absence of such a comparison, the department is not, on the other hand, entitled to invoke the presumption of transfers of profits thus instituted but must, in order to demonstrate that an enterprise has granted a liberality by invoicing services at an insufficient price - or by paying them at an excessive price - establish the existence of an unjustified difference between the agreed price and the market value of the property transferred or the service provided
- In order to judge that SAP France had granted SAP AG a liberality by renouncing, for the years 2012 and 2013, to receive a remuneration in return for the deposit of its cash surpluses with the latter, the administrative court of appeal ruled that the administrative court of appeal based its decision on the fact that this zero remuneration was unrelated to the remuneration to which the company would have been entitled if it had placed its cash surpluses with a financial institution on that date, without this absence of remuneration finding its counterpart in the possibility of financing cash requirements, which were non-existent for the years in question. In holding, however, that the fact that the rate of remuneration of the sums thus deposited with SAP AG resulted from the application of the rate formula provided for in the cash management agreement, which the parties chose to limit to a non-negative result during the performance of that agreement, is irrelevant in this respect, without investigating whether SAP France had acted in accordance with its interest in concluding the agreement in these terms on 17 December 2009, or what obligations it had during the years in dispute, the Administrative Court of Appeal erred in law.
- It follows from the foregoing, without it being necessary to rule on the other grounds of appeal, that the company SAP France Holding is entitled to request the annulment of Article 3 of the judgment which it is challenging. In the circumstances of the case, it is appropriate to charge the State with the sum of 3,000 euros to be paid to the company SAP France Holding under Article L. 761-1 of the Administrative Justice Code.
D E C I D E :
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Article 1: Article 3 of the judgment of 17 December 2021 of the Versailles Administrative Court of Appeal is cancelled.
Article 2: The case is referred to this extent to the Versailles Administrative Court of Appeal.
Article 3: The State shall pay the company SAP France Holding the sum of 3,000 euros under Article L. 761-1 of the Administrative Justice Code.
Article 4: This decision shall be notified to the SAP France Holding company and to the Minister of the Economy, Finance and Industrial and Digital Sovereignty.
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