Loss of value of a subsidiary's shares: when is it tax-deductible?
The Administrative Court of Appeal of Nancy, in a ruling delivered on April 24, 2025, annulled the tax deductibility of management fees paid by franchised companies of the Afflelou group to their parent company. The reason: the lack of evidence of services actually performed. This decision reminds companies of the importance of rigorous documentation when it comes to intragroup transactions.
Intrgroup management fees: increased vigilance from the tax authorities
An empty operational framework agreement
The companies involved, including Sté Optique des Moissons, operate in the optical sector under the Afflelou brand. They had entered into a framework agreement with their parent company, which stipulated the provision of strategic management and information systems organization services.
However, the analysis of the facts reveals a total absence of human resources (no salaried personnel) and material resources (no fixed assets) on the part of the parent company. Consequently, it could not clearly perform the services allegedly billed.
General invoices, without concrete justification
The only documents submitted to the tax authorities to justify the deduction? Generic invoices simply mentioning "management fees according to the framework agreement." No details, no reports, no exchanges attesting to services actually rendered.
In light of this deficiency, the deducted charge could not be considered as incurred in the interest of the company, leading to its tax reintegration.
The legal framework: the principle of reality of services
The criteria for deductibility of management fees
Case law is clear: the deduction of management fees is only possible if the services are:
- Real, meaning actually performed,
- Specific, with a tangible link to the activity of the beneficiary company,
- Justified, by credible and traceable documents.
The ruling of the CAA of Nancy (references: n° 22NC02043 and n° 22NC02613) of April 24, 2025, reinforces this expectation. The mere existence of a written agreement is no longer sufficient: the content of this agreement must correspond to verifiable execution.
Required execution capacity and functional link
In this case, the parent company attempted to demonstrate that an indirect partner acted on behalf to perform the services. But in the absence of a contract, engagement letters, or execution reports, this argument was rejected.
This decision sends a clear message: only a structure with internal resources or formalized subcontracting can legitimately bill management fees.
Rejection of charges: what are the tax implications?
In the absence of tangible evidence, the management fees were reintegrated into the taxable income of the companies involved. This adjustment was accompanied by a questioning of the sincerity of the accounting entries, potentially leading to additional sanctions, including:
- Tax penalties for characterized failure,
- Reclassification as abuse of rights in the case of artificial arrangements.
These consequences can be financially burdensome, but also impact reputation and legal security.
How to secure management fee agreements?
1. Draft a detailed agreement that reflects economic reality
The agreement should clearly indicate:
- The nature of the services,
- Their frequency and duration,
- The remuneration terms,
- The obligations for follow-up and reporting.
It should also reflect a real economic logic between the entities.
2. Document and trace each service performed
To prove that the services were indeed rendered, the billing company must provide:
- Evidence of the resources mobilized (personnel, tools, software),
- Deliverables (reports, manuals, dashboards),
- Records of exchanges (emails, meetings, minutes).
Invoices must be precise and supported by verifiable documentation.
3. Demonstrate the economic utility of the services for the beneficiary company
Each billed service must have an identified impact or utility for the company paying for it. This ensures the link between cost and operational or strategic performance of the activity.
Strengthening control of intragroup flows
This decision is part of a broader context of increased transparency on intragroup relationships. Franchises, subsidiaries, holdings, and other integrated structures are particularly targeted by the tax authorities.
Actors must now understand that tax compliance does not stop at contractualization. It also requires continuous, usable documentation that is consistent with economic reality.
---
Are you involved in intragroup services or management fee agreements? The firm PRAX Avocats can assist you with:
- The drafting of compliant agreements,
- The documentary audit of your internal flows,
- The defense during tax audits.
Contact us for personalized support.
Published on: 2025-05-01T22:00:00.000Z Integrated SEO keyword: Generate Image