Artistic income received through a foreign civil society: what the Council of State has just ruled.

Artists working internationally often structure their activities through foreign companies. This economic reality raises complex tax questions, particularly regarding the classification of income, the territoriality of taxation, and the applicable regimes for professional expenses.

The ruling of the Council of State on June 2, 2025 (n° 492796 and 492799) addresses this issue through the case of two members of the Scorpions group. This decision highlights a problem faced not only by artists but more broadly by any individual associated with a foreign company not subject to corporate tax that receives income in France. The challenge: to correctly classify this income and claim any associated professional expense deductions.

Context: a German music company and income received in France

In this case, two musicians residing in Germany and partners in "Scorpions GbR" (Gesellschaft bürgerlichen Rechts, the German equivalent of a civil society) received income in France from several concerts.

They spontaneously declared this income in the category of wages and salaries while requesting, through a claim, the deduction of their actual expenses as permitted by Article 83 of the General Tax Code (CGI). The tax administration rejected their claims. The Paris Administrative Court of Appeal upheld the refusal, considering that the income in question could only be classified as wages and salaries. Upon review, the Council of State annulled this decision… and corrected the legal error.

Why this turnaround? Because the classification of income depends on the nature of the activity, the type of legal entity, and the role played by the individual. And above all, because the involvement of a foreign company requires reasoning according to precise assimilation principles to assess the applicable taxation.

A German company assimilated to a French civil society

When a French or foreign taxpayer is a partner in a foreign company not subject to corporate tax, it must be determined whether this company can be assimilated to a partnership under French law. This solution was established by the Artémis SA jurisprudence (CE, November 24, 2014, n° 363556), which outlines an analysis method based on the examination of the local rules applicable to the foreign company.

In this case, the German GbR—a traditional partnership—was assimilated to a French civil society under Article 8 of the CGI: that is, a tax-transparent company not subject to corporate tax. Each partner is thus taxed directly on their share of the profits.

Direct consequence: the income received in France by the musicians did not fall under wages and salaries, as claimed by the administration, but under the category of non-commercial profits (BNC), in accordance with Articles 92 and following of the CGI.

Independent artistic activity: a decisive qualification issue

It is not enough to note that the income has a French source: it is also necessary to determine in which tax category it falls. Here, according to a consistent jurisprudence of the Council of State (CE, July 8, 1988, n° 60731; CE, June 22, 2011, n° 319240), an artistic performance without a subordinate relationship with a client is considered a non-salaried activity, thus taxable in the BNC category.

The judges clearly reiterate this principle: the fact that artists perform on stage does not mechanically mean they are employees in the tax sense. Especially when there is no employment contract with the event organizer, but the performances are provided through a transparent company.

This reclassification changes everything. Indeed, the rules applicable to the deduction of professional expenses differ according to income categories. For wages and salaries, the deduction of actual expenses is strictly regulated by Article 83, 3° of the CGI; for BNC, however, the regime is more flexible, and expenses directly related to the activity are allowed as deductions.

In other words, by reclassifying the income as BNC, the Council of State opens the door to the deduction of significant actual expenses incurred by the musicians for their artistic activity.

Franco-German tax treaty: no obstacle to BNC qualification

There could have been uncertainty regarding the interpretation of the Franco-German tax treaty, particularly its Article 12 concerning the taxation of liberal professions and independent activities. The administration could argue that this provision opposed the taxation in France of such income. The Council of State clearly dismisses this reading.

The treaty does not prohibit France from taxing according to BNC rules the share of results received in France by a German resident of a foreign civil society. This point provides important clarification for cross-border situations in a context of explosive artistic or commercial activities conducted through foreign legal structures.

What practical consequences for artists and professionals working internationally?

This type of litigation is not limited to the music sector. Many entrepreneurs, independent consultants, or creators operate their activities within a foreign company. As long as this company is not subject to corporate tax and has characteristics comparable to a French partnership, the classification of income paid to the partner arises.

Here are the main practical lessons from this case:

A foreign company like a German GbR can be fiscally assimilated to a French civil society;
Income from such a company is taxable in the hands of the partners as BNC if the activity itself is non-commercial and carried out independently;
This qualification allows for the deduction of actual professional expenses under the BNC regime, which is much more advantageous than that of wages and salaries in certain cases;
The Franco-German tax treaty does not prohibit this assimilation or taxation;
A contentious claim can allow for the assertion of these rights, even after spontaneous declaration in another category.

For entrepreneurs or start-ups active internationally, particularly in the creative or knowledge economy sectors, it is important not to underestimate these issues. A poor classification can not only lead to heavier taxation but also deprive the possibility of deducting essential expenses for the functioning of the activity.

In conclusion: anticipation, structuring, and securing

This decision reaffirms one thing: in matters of cross-border taxation, anticipation is the best ally of optimization.

Structuring your activity through a foreign company can be relevant but must be accompanied by a comparative analysis of the tax consequences in France;
Poorly anticipated structuring can deprive significant tax advantages;
In case of doubt or reassessment, it is possible to act through a claim to assert your rights.

At PRAX Avocats, we regularly assist start-ups and entrepreneurs in structuring their activities, including in an international context. Our approach is tailored to serve a sustainable and secure legal strategy.

Are you an entrepreneur, artist, or project holder questioning the structuring of your activity internationally? Do you want to secure the tax treatment of your income or protect your interests during an audit?

→ Contact the firm. We guide you, step by step.

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