Heritage, taxation, and artificial arrangements: the La Pataterie case and article 209 B of the CGI.

The recent case involving the La Pataterie group and its structuring between France and Luxembourg illustrates the limits of the fight against tax evasion. Despite a setup that has all the characteristics of an artificial scheme, the tax administration ultimately dropped the charges, creating surprise and raising debates about the scope of article 209 B of the General Tax Code (CGI) and the discretionary power of the State.

A cross-border structure called into question

La Pataterie, a well-known brand in the restaurant sector, had established a structure based on a French holding company based in Limoges and a Luxembourg subsidiary, the FIP company. The latter, holder of the brand and know-how of the group, granted the exploitation of these intangible assets to the parent company in exchange for royalties, thereby creating financial flows to a country with more favorable taxation.

On the surface, this organization could fit into a logic of international wealth management. But for the tax administration, there was little doubt that it was an artificial setup solely intended to evade tax in France — a suspicion reinforced by the lack of genuine operational activity in Luxembourg.

The weapon of article 209 B of the CGI

Article 209 B of the CGI allows the administration to reintegrate into the French taxable income the profits of a foreign subsidiary, provided that two conditions are met:

The subsidiary is located in a country with privileged taxation;
The establishment of this subsidiary is based on an artificial setup aimed at evading tax.

In the case of La Pataterie, the administrative court of Limoges (judgment n° 2200695 of July 2, 2024) found that the criteria were met:

80% exemption on royalties received by the Luxembourg company thanks to a tax ruling;

Lack of economic substance in Luxembourg: very limited staff, absence of local decision-making, fictitious headquarters...

As a result, the profits of the FIP made between 2012 and 2015 were reintegrated into the accounting results of the French holding under article 209 B.

An unexpected turnaround

However, to everyone's surprise, the case experienced a spectacular turnaround before the Administrative Court of Appeal of Bordeaux (CAA Bordeaux, March 27, 2025, n° 24BX02175). The minister in charge of the Budget withdrew from the procedure without explanation, leading to the cancellation of the tax reassessments.

This withdrawal does not stem from a local tax service but from the ministry itself, raising numerous questions in the legal and tax world.

What was La Pataterie's defense?

During the hearing, the company, then in judicial liquidation, put forward several arguments:

Procedural defect, related to the incompetence of the signatory of the rejection decision;
Demonstration of a real foreign project and not an artificial one, thus refuting the qualification of a setup.

Despite the apparent weakness of this defense in light of the initial judgment, the administration dropped the case.

Key lessons for French companies

This decision raises as many questions as it provides answers. Nevertheless, it serves as a reminder of certain essential rules for groups wishing to structure their activities abroad.

The importance of economic substance

Any legal structure created abroad must have a real economic existence. Here are some key elements to respect:

Have premises and employees in the host country;

Ensure an effective local management;

Conduct justifiable operational activities in the concerned state.

Without this, the tax administration can apply article 209 B and reallocate the profits to the parent company in France.

Valuing and documenting the international strategy

It is imperative to document in advance the economic, commercial, or strategic reasons justifying a foreign establishment:

Market studies;
Business plan;
Minutes of motivated decisions...

This preparatory work is essential in case of a tax audit or litigation.

What framework for the future?

The La Pataterie case demonstrates that, even in the presence of elements validated by an administrative court, the discretionary power of the tax administration can overturn the outcome of a dispute.

Is this a strategy to avoid unfavorable case law? A political management of a sensitive file? The silence of the Court maintains an uncomfortable legal ambiguity for tax law practitioners.

📌 Key date: this decision was rendered on April 1, 2025 (2025-04-01T22:00:00.000Z), a date to remember in the analysis of jurisprudential developments in tax structuring.

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Conclusion: heightened vigilance on international setups

Even though La Pataterie escaped a significant tax reassessment, there is no guarantee that other companies will receive the same treatment. The use of structures in jurisdictions with preferential taxation remains high-risk if the local economic substance is insufficient.

French groups must therefore exercise caution, rigor in the design of their setups, and surround themselves with expertise.

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