that must be appreciated the normal character of the deed of issue management

The increase in the number of groups of companies, be they domestic or international dimension is a heavy tendency of economy imperfectly apprehended by the tax law, which, until now, refused to assess the normal character of the management of a company in the interest of the group to which it belongs.

Theory called "the anomalous Act of management", purely judicial origin, is based on the assumption that any business is aimed at the pursuit of profit. It allows the tax authorities to deny the deductibility of a charge by a company on the grounds that it is foreign to his interest, either excessive in view of the expected benefits. A recurrent problem arises when a company supports a load which, without being consistent with its interest direct and immediate, is clearly committed to the interests of the group to which belongs the company. The traditional jurisprudence considers that normal or abnormal management decisions must be assessed from the strict point of view of the reporting company, regardless of the ties that bind it to the other economic actors.

Jurisprudential evolution

The interest of the group is thus indirectly admitted that where it coincides with that of the reporting company. Thus the jurisprudence admits, under certain conditions, that a parent company could provide financial assistance to its subsidiary in difficulty, or even to its sub-subsidiary, or that a society consents abandonment of debt to sister company with which it maintains current trade relations.

Recently, the administrative Court of appeal of Paris (1) had nevertheless initiated a jurisprudential evolution in admitting that, in the case of an integrated tax group, specific device provided by the General Tax Code, "it is in the interest of the integrated group (...)". "that must be appreciated the normal character of the deed of issue management".

Thus, in the case of company EISAS, the administrative court considered the fact, for a French subsidiary, support of expatriation benefits for foreign workers employed by foreign subsidiaries of its French parent company was for the French subsidiary adequate consideration in the interest of the group to promote the expatriation of French executives to ensure the development of foreign subsidiaries.

Refusing to depart from its traditional position, the Council of State (2) firmly quashed the two above decisions rendered by the Paris Court, considering that the specific scheme of the tax integration does not derogate from the General rules of deductibility loads.

A disappointing solution

This solution of the Council of State is disappointing first from a practical point of view, because it disabled French groups that cannot bear to one of their subsidiaries, one that has the required financial capacity, load but clearly consistent with the interest of group but whose interest in the subsidiary is not enough direct or immediate. From a legal point of view, this solution is also disappointing because obviously, the Council of State could rely on the existence, in the two cases of a fiscally integrated group.

This device, which allows to impute the deficits of certain companies on the profits of other companies and makes only parent company liable for tax on the profits of the whole group, is indeed undoubtedly a form of recognition by the legislature of the existence of the group.

Moreover, as the theory of the anomalous Act of management is a purely judicial creation, modification by the judge without specific textual basis was not an insurmountable obstacle. In these circumstances, it is regrettable that the High Court did not intend to be more daring by making more flexible the concept of abnormal Management Act reading fiscally integrated French groups. On this point, the tax competitiveness of French groups remains therefore suspended an unlikely legislative change.