• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 3/4/2013

France - Cross-border payment of management fees not deductible 

March 4:   The Paris Administrative Court of Appeal (Cour administrative d’appel de Paris) in a February 2013 decision held that management fees paid by a French holding company to an indirect shareholder in the Netherlands, as payment for certain management and assistance services, were not deductible because they failed to satisfy the benefit test.


Pursuant to an assistance services agreement, a French holding company paid lump-sum management fees to an indirect shareholder located in the Netherlands. The assistance services provided under the agreement related to investment strategy, administrative, legal, accounting, and financial services.

The French tax authorities challenged the deductibility of these management fees, asserting that the payment of such fees by the French company actually resulted in the French company supporting the costs expended by the Dutch entity to manage/control the French company (what may be viewed as “shareholder” or “stewardship” costs).

The French tax authorities considered that these assistance services were not provided for the sole benefit of the French entity, and were not deductible.

Administrative Court of Appeal / Paris

The appellate court agreed with the French tax authorities’ position, finding that:

  • The benefit for the French entity of the management services provided by its Dutch related entity had not been proven.
  • The French entity was already receiving administrative, accounting, and legal services, at arm’s length prices, from other entities in France.

KPMG observation

Tax professionals have noted that with respect to management fees, this decision highlights the need for taxpayers to pay close attention to certain areas—e.g., the benefit test, the non-duplication of services, and whether management fees that are “re-charged” actually relate to shareholder/stewardship costs.

Contact a tax professional with KPMG's Global Transfer Pricing Services.

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