Support services for executives: key takeaways from the position of the Council of State.

During a business acquisition, the issue of the tax treatment of support services for the managing partner — often referred to as "management fees" — is at the center of many debates. On April 8, 2026, in the case of Société Natural Origins (n° 507231), the Council of State confirmed the refusal to admit the appeal of a company contesting the reintegration of nearly 200,000 euros of services billed by a Luxembourg parent company in the context of an acquisition.

This decision, in line with the jurisprudence of the Administrative Court of Appeal of Lyon (CAA, June 12, 2025, n°24LY02077), reminds us of the strict criteria governing the deductibility of expenses incurred for intergroup services. For start-ups, leaders, and investors, this is a strong signal: the tax administration and the tax judge rigorously monitor the reality, nature, and purpose of these services.

An Increasingly Strict Economic and Legal Context

With the rise of LBO (Leverage Buy-Out) operations and acquisitions by investment funds, many leaders or holding companies enter into assistance and management agreements. These services, often billed to the operational structure, include support for the leader, the transfer of know-how, or strategic support for the company's development.

While these arrangements are common and sometimes legitimate from an economic standpoint, they raise heightened scrutiny from the tax administration. The issue lies in the delicate boundary between expenses incurred in the social interest of the French company and those primarily benefiting the shareholder or acquirer.

The Natural Origins Ruling: An Illustration of the Tax Judge's Requirements

In the Natural Origins case, the French company had included in its deductible expenses support services billed by a Luxembourg company during its acquisition. These services involved the transmission of administrative, commercial, and strategic information between the former leaders and the new owner.

The appeal judge found that:

1. The French company was not a signatory to the management agreement — signed between two Luxembourg companies — and could therefore not legitimately bear the cost of the billed services;

2. The services had been primarily performed for the benefit of the acquirer, not in the direct interest of the French company.

These two elements led the Court to deny the deductibility of the corresponding expenses and to apply a 40% increase for deliberate non-compliance, considering that the company had sought to evade tax.

The Council of State, by refusing to admit the appeal, implicitly validated this analysis, thus confirming the severity of the criteria applied.

Essential Criteria for the Deductibility of Intergroup Services

The lessons from this case are particularly important for innovative companies and international groups. Three principles can be retained:

1. The Reality and Justification of Services

It is up to the beneficiary company to demonstrate the reality of the services rendered: precise content of the services, deliverables, people involved, execution timeline.

Documents that are too general (PowerPoint presentations, follow-up emails, poorly detailed meeting notes) are insufficient. A clear contractual and operational traceability is essential.

2. The Social Interest of the Beneficiary Company

Expenses must be incurred in the own interest of the company that deducts them, and not in the interest of the shareholder, holding company, or acquirer.

In other words, the service must concretely improve the activity, organization, or performance of the French company and not simply facilitate the transfer of the company for the benefit of an investor.

3. Proportionality and Billing at Fair Price

The billed amount must correspond to a real and proportionate consideration. Flat fees or those unrelated to the actual time spent expose the company to reclassifications.

It is recommended to establish a valuation report or an internal justification of the calculation method for management fees, to attest to their rationality.

Implications for Start-ups and Growing Companies

Young companies and scale-ups, often required to welcome foreign investors or structure their group around holdings, must anticipate these issues from the negotiation of support agreements.

• Concrete Case: a biotech start-up being acquired by a foreign fund plans for assistance from the outgoing leader for a year. If this service primarily benefits the acquirer (transfer of know-how, introduction to business partners), its accounting coverage by the operational company may be contested.
• Conversely, if the service aims at internal organization, managerial continuity, or training of the new management, deductibility may be justified provided it is documented and proportionate.

Best Practices to Secure Management Fee Agreements

To reduce the risks of reassessment, it is recommended that leaders and financial managers:

• Formalize a clear and precise contract, signed by the beneficiary company;

• Detail the exact nature of the services, their objectives, and the expected deliverables;

• Justify the valuation method (time spent, hourly rate, objectives achieved);

• Verify the consistency between the invoice, the contract, and the economic reality;

• Archive tangible evidence of the services rendered (reports, technical documents, analyses).

A preventive tax audit or a contractual review by a business law firm can be decisive in avoiding later challenges, especially in the context of a business acquisition.

Support from PRAX Avocats

At PRAX Avocats, we support start-ups, leaders, and investors in the legal and tax security of their operations. Our expertise in business law, taxation, labor law, and intellectual property allows us to offer a 360° view of the issues related to intergroup agreements and support services for leaders.

Our approach is based on:

• A precise analysis of the context of each operation (acquisition, fundraising, transfer);

• The drafting of tailor-made contracts compliant with legal and tax requirements;

• A strategic follow-up to optimize governance while maintaining regulatory compliance.

Conclusion: Caution and Anticipation, Keys to Peaceful Management

The Natural Origins ruling illustrates the heightened vigilance of the tax authorities and the administrative judge regarding support services between related companies. In practice, the deductibility of these expenses can only be admitted if their reality, social interest, and proportionality are clearly established.

For business leaders, especially in the world of start-ups and international investment, caution is essential: a poorly structured agreement can quickly turn into a major tax risk.

Contacting the firm will provide tailored legal support to secure your agreements and anticipate reassessment risks.

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For personalized legal support for your business project, contact PRAX Avocats.