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France: Nestlé case


Renaud Jouffroy

Fabien Cotte

It is still uncertain whether a cross border transfer of a cash pooling activity within a group may constitute an indirect transfer of profit. In 2011, the Paris Administrative Court ruled that the transfer of a cash pooling activity without compensation from a French company to another member of the group located in a foreign jurisdiction (Switzerland) qualifies as an indirect transfer of profits. Therefore, the tax authorities have been entitled to reassess Nestlé up to the value of the activity transferred, retaining a profit margin of 0.5%, which according to the tax authorities corresponded to the usual profit margin applied by various multinational companies for such an activity.

The Court of Appeal of Paris reversed the decision of the Paris Administrative Court, but only to the extent that the tax authorities cannot justify the 0.5% rate, in particular in the light of the activity performed, guarantees granted by the debtors and their risk profiles.

The Court of Appeal did not rule whether such a transfer of a cash pooling activity within a group may constitute, in itself, an indirect transfer of profit on the transfer of a valuable intangible. On this basis, and pending the Supreme Court decision, the transfer of any functions or activities (including non-operational intra-group ones) outside France should still be carefully monitored.

Renaud Jouffroy (

Tel: +33 (0) 1 56 57 42 29
Fabien Cotte (

Tel: +33 (0) 1 56 57 47 72

Landwell & Associés, Paris


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