The rulings handed down by the Paris and Nancy Administrative Courts of Appeal (Foncière Vélizy Rose and Eco NRJ cases respectively) illustrate the constant vigilance of tax judges with regard to the reality and usefulness of intra-group services. In both cases, the requesting companies had their deduction claims rejected, as the tax authorities had characterized an unjustified impoverishment, or even a deliberate intention to evade tax.
The legal framework: stronger evidentiary requirements for taxpayers
The two rulings reiterate the main principles laid down in Articles 38 and 39 of the CGI, according to which taxable profit is established by deducting expenses that are justified by their reality, their amount and their interest for the company. It is up to the taxpayer to provide precise information on the nature, purpose and counterpart of the expenses. When the tax authorities question an expense, they must substantiate their doubts before the judge; but in the case of services, the initial burden of proof lies with the taxpayer.
In both cases, the judge considered that this demonstration was lacking: the companies had limited themselves to producing terse invoices, unsigned documents or documents not attributable to the service provider, and no elements enabling the services actually rendered to be quantified or qualified.
Redundant or imprecise services, with no clear link to business needs
In the Foncière Vélizy Rose case, the company had signed an asset management contract with Obélisque Immobilier, a company with no resources of its own and headed by the same manager. This contract, which was supposed to cover the monitoring of a single building leased in its entirety to Thalès, duplicated services already entrusted to a property manager (AAM), without Obélisque's added value being demonstrated.
The same logic was applied in the Eco NRJ case, where the French company paid €6,500 a month to its Luxembourg sister company, Eco NRJ Lux, for commercial and management services. The generic nature of the invoices, the weakness of the supporting documents produced and the lack of evidence of any actual consideration led the judge to disallow the deduction of expenses.
In both cases, the tax authorities were able to establish a clear lack of economic substance behind the contractual relationship, and a legitimate doubt as to the real purpose of the intra-group financial flows.
Situations of joint control and confusion of interests
Both decisions also emphasize the capital-intensive and personal context in which these agreements were concluded.
- - Foncière Vélizy Rose: the company's managing director was also the managing director of Obélisque Immobilier, a company set up by his brother. AAM, another service provider involved, was co-managed by his sister.
- - Eco NRJ: both companies were managed by the same person. The payment of fees was not justified by a decision of the competent corporate bodies, leaving doubt as to whether the director was being paid indirectly.
In both cases, family or management ties reinforced the administration's analysis of the existence of an abnormal act of management: a choice that impoverishes the company, has no economic justification, and is motivated by considerations unrelated to the company's own interests.
Confirmation of penalties for wilful default
Lastly, both courts confirmed the application of the 40% surcharge for deliberate failure to comply (art. 1729 CGI). This penalty presupposes a clear intention to evade tax, which the tax authorities have demonstrated in each case by :
- - the significant amount of the expenses concerned ;
- - the absence of concrete justification despite reminders;
- - a clear community of interests between the entities concerned;
- - the lack of formal governance, in particular the absence of any decision by the corporate bodies validating these financial flows.
The judge dismisses arguments relating to the formal validity of the contracts or the parallel taxation of income in other entities: what counts is the absence of proven usefulness for the debtor company.
Practical lessons: precautions to take to secure intra-group services
These decisions illustrate the precautions that companies must take to avoid requalification and reassessment:
- - Formalize intra-group agreements (purpose, nature, frequency, deliverables) ;
- - Maintain documented traceability of services rendered (letters, reports, identifiable deliverables);
- - Avoid redundancies with other service providers or with the manager's functions;
- - Isolate the governance decisions (minutes of board meetings or general meetings) justifying the use of services and their terms and conditions;
- - Maintain real autonomy for service providers, with identifiable human and material resources.
Over and above the risk of a tax reassessment, these rulings serve as a reminder that intra-group services must respond to a clear economic rationale that can be verified and defended before the tax authorities.
Our opinion and recommendations
These two cases illustrate a consistent line of jurisprudence: the mere existence of a contract or invoice is not sufficient to justify the deductibility of an intra-group expense. The taxpayer must demonstrate the reality, usefulness and value of the services received, particularly where there are capital or personal links between the entities.
To avoid such recharacterizations, we recommend :
- - Precise, dated contracts, specifying the concrete services expected and their frequency.
- - Tangible proof of execution: signed reports, e-mails, time-stamped and identifiable documents.
- - No redundancy with other functions or service providers.
- - Validation by the corporate bodies in the event of a link with the executive (e.g. indirect compensation).
- - Clear economic justification of the interest for the beneficiary company.
- - Annual review of intra-group agreements and documentation included in tax and transfer pricing files.
When it comes to intra-group services, document transparency and anticipation of tax arguments are key. This upstream work limits the risk of tax adjustments and penalties for deliberate non-compliance.
CAA Paris, 7th chamber, April 29, 2025, 23PA02275, Société Foncière Vélizy Rose
CAA Nancy, April 24, 2025, 22NC02867, Société Eco NRJ
