You run a French subsidiary from London, New York, Berlin or Dubai. Every month or every quarter, your foreign parent company sends an invoice to the French entity: group management services, strategic supervision, finance and HR support, IT systems, brand and marketing coordination. Your French accountant books the invoice as an external charge, deducts it from taxable profit, and recovers the French value added tax shown on the invoice when the reverse charge does not apply. Everything looks routine, until the SIE (Service des impots des entreprises, the French business tax office) sends a request for information or a formal reassessment proposal. The auditor writes that the so-called management fees do not correspond to real services, or that they are excessive, or that they are really a disguised distribution of profits to the foreign parent. The deduction for corporate income tax is rejected, the VAT deduction is rejected, late interest and penalties are added, and the additional tax can easily reach six figures. This article explains, in practical terms, why French auditors attack intra-group management fees, what proof they demand, and how a foreign owner answers the audit, repairs the file and contests the reassessment before the tax courts. It is written for the foreign shareholder or director of a French SAS (societe par actions simplifiee, the flexible joint-stock company most foreign founders choose) or SARL (societe a responsabilite limitee, the closed limited liability company), and every French acronym is explained on first use.
French tax law starts from a simple principle. The provision we rely on states that “Le bénéfice net est établi sous déduction de toutes charges”, which means net profit is computed after deducting all charges, and it expressly lists “Les frais généraux de toute nature, les dépenses de personnel et de main-d’oeuvre” as deductible (Article 39, 1 of the General Tax Code (Code general des impots, CGI)). Management fees fall in principle within general expenses. But the deduction is only available when three conditions are met at the same time: the expense corresponds to a real service actually rendered to the French company, it is incurred in the direct interest of that company’s own business and not only in the interest of the group or the parent, and its amount is not excessive by comparison with what an independent company would have paid for an equivalent service. When the service provider is a related company established abroad, a second layer of rules applies. The statute provides that “les bénéfices indirectement transférés à ces dernières, soit par voie de majoration ou de diminution des prix d’achat ou de vente, soit par tout autre moyen, sont incorporés aux résultats accusés par les comptabilités”, meaning profits indirectly transferred abroad through inflated purchase prices or any other means are added back to the French taxable result (Article 57 of the General Tax Code). The French administration loves this provision because it creates a presumption once price comparisons point to an advantage, and the company must then show equivalent counter-performance. Territoriality reinforces the same logic: corporate tax takes into account “uniquement des bénéfices réalisés dans les entreprises exploitées en France”, only profits earned in businesses operated in France (Article 209, I of the General Tax Code). Money that leaves France without a solid service behind it is treated as profit that should have stayed in France. The practical consequence is visible in the leading court decisions on management fees, and foreign groups lose these cases far more often through weak evidence than through bad law. If your French company pays or plans to pay fees to its foreign parent, this guide gives you the file the auditor expects, the traps that trigger reassessment, and the procedural route to challenge it. For the general setting of a French subsidiary, our pillar guide on setting up a company in France as a foreign founder: bank account, Kbis, VAT and first hire and our explainer on French corporate tax for foreign owners: IS at 25 percent, branch versus subsidiary, and paying on time complete this analysis.
I. Why the French tax office attacks management fees billed by your foreign parent
A. My French subsidiary pays monthly fees to our foreign parent: what will the auditor ask first?
The auditor’s first question is always the same: what exactly did the French company receive, on which dates, from whom, and for what measurable benefit. An invoice that says management fees, administrative support or strategic assistance, with a round monthly amount and no attachment, is treated as a declaration of intent, not as proof. The Paris administrative court of appeal stated this bluntly in a case where a French SARL deducted intra-group invoices: “ces factures, revêtues de l’unique mention ” managements fees “, ne contiennent aucun détail relatif à la nature et à l’importance des prestations fournies à la requérante”, meaning the invoices bearing only the words management fees contained no detail about the nature and scale of the services supplied to the claimant, and the court added that they could not by themselves prove the reality or the amount of the services (CAA Paris, 10 October 2018, No. 17PA02373, SARL Fideclic). The company argued that it had benefited from the marketing, purchasing and finance skills of the parent’s staff, from pooled sourcing in China and from a new logistics platform, but it produced only vague emails, general meeting minutes and internet screenshots. The court answered that “ces éléments, vagues et imprécis, ne permettent d’identifier ni la nature exacte de ces activités, ni les dates auxquelles, ou conditions dans lesquelles, elles auraient été exercées, ni les rémunérations versées”, these vague and imprecise items identified neither the exact nature of the activities, nor the dates or conditions of performance, nor the salaries paid, so the deduction was rejected for both corporate tax and VAT. That decision is the template for almost every management fee reassessment in France: the administration expressly disputes the reality of the charges, the invoices alone prove nothing, and general statements about group synergies do not replace dated evidence of work done for the French entity itself.
Concretely, the SIE controller works through a checklist that foreign directors should know in advance. First, the written intra-group services agreement: is there a signed contract before the invoicing period, describing each category of service, the calculation method, the allocation key between group companies, the billing frequency and the termination clause. An agreement signed during the audit, backdated or copied from a template without figures, carries almost no weight. Second, the reality trail: time sheets or mission reports naming the parent employees who worked for the French subsidiary, travel records and meeting calendars, emails requesting and delivering the work, deliverables such as reports, budgets, recruitment files, IT tickets, marketing materials adapted to the French market. Third, the benefit test: how did each service help the French company’s own turnover or cost base, rather than the parent’s control function as shareholder. Shareholder activities such as consolidated group reporting, supervision of the investment, compliance work performed to satisfy the parent’s own legal duties, or duplicated services where the French subsidiary already employs a local finance manager or marketing officer, are routinely disallowed because they serve the parent, not the subsidiary. Fourth, the price test: how the fee was computed, whether by hourly rates, cost-plus with a stated margin, or a percentage of turnover, and why that method matches what independent companies charge. A flat percentage of turnover with no link to hours worked is the weakest formula and the first the administration attacks as a disguised dividend. Fifth, the payment trail: bank transfers between the French company and the parent, compensation or netting arrangements documented in writing, foreign exchange records, and consistency between the accounting entries, the VAT returns and the DAS2 or transfer pricing appendices. In the Fideclic case the taxpayer also argued that the invoices had been settled, but the court held that payment was irrelevant once the reality of the underlying service was not shown, and “sans qu’il y ait lieu de s’interroger sur la réalité et la régularité du paiement par compensation des factures, le service a remis en cause la déductibilité de la taxe en cause” (CAA Paris, 10 October 2018, No. 17PA02373), the office could reject the VAT deduction without even examining whether the set-off payment was real or regular. Paying the invoice therefore never cures a file without substance.
Two parallel VAT and withholding traps accompany the corporate tax risk and must be handled in the same file. On VAT, the French company can only deduct input VAT “grevant les éléments du prix d’une opération imposable”, that is VAT burdening the price components of a taxable transaction (CAA Paris, 10 October 2018, No. 17PA02373, point 7), so where no real taxable service is demonstrated the VAT on management fees is rejected even if the invoice shows a VAT line and even if the invoice was paid. Where the parent is established outside France and the service is genuinely rendered, the reverse charge mechanism often applies and the French subsidiary self-assesses French VAT; errors in that self-assessment generate a second reassessment independent of the corporate tax dispute, a point developed in our guide on intercompany invoices, VAT and reverse charge between a foreign parent and its French subsidiary. On distributions, recharacterized fees can be treated as deemed dividends paid to the foreign parent, with dividend withholding tax potentially added on top of the corporate tax adjustment. The statute on European parent companies states that “La retenue à la source prévue au 2 de l’article 119 bis n’est pas applicable aux dividendes distribués à une personne morale qui remplit les conditions énumérées au 2 du présent article”, the withholding tax on dividends does not apply to dividends paid to a qualifying parent company (Article 119 ter of the General Tax Code), but that exemption requires the foreign parent to prove that it is the effective beneficiary, that it has its effective management seat in the European Union or the European Economic Area with an administrative assistance treaty with France, and that it holds the required participation: a letterbox holding company or a parent outside the qualifying area cannot rely on it. Fees paid to a person in a low-tax jurisdiction face an even stricter rule, because the law provides that such sums “ne sont admis comme charges déductibles pour l’établissement de l’impôt que si le débiteur apporte la preuve que les dépenses correspondent à des opérations réelles et qu’elles ne présentent pas un caractère anormal ou exagéré”, they are deductible only if the debtor proves real operations and a normal, non-excessive character (Article 238 A of the General Tax Code). Finally, where the parent also funds the subsidiary through shareholder loans, interest deductibility obeys its own ceiling rules for related-party debt only within strict ceilings: the statute opens with “Les intérêts afférents aux sommes laissées ou mises à disposition d’une entreprise par une entreprise qui est son associée” (Article 212, I of the General Tax Code), so a file that mixes undocumented fees and heavy related-party interest invites a combined adjustment. The official corporate tax return guidance on impots.gouv.fr and the transfer pricing documentation doctrine published in the BOFiP (Bulletin officiel des finances publiques, the tax administration’s official commentary) confirm that the administration expects contracts, allocation keys and comparables before it accepts any intra-group charge.
B. The tax office says our fees hide a profit transfer: how does Article 57 shift the burden of proof?
When the auditor moves from the general deduction rule to the transfer pricing provision, the legal terrain changes and foreign groups must understand the presumption mechanism. Article 57 does not require the administration to prove fraud or an intention to evade tax. Once the administration shows, through comparisons with independent companies or with the French company’s own dealings with independent clients, that the French entity paid too much for what it received or received too little for what it supplied, the law treats the difference as an indirect transfer of profits abroad. The Versailles court of appeal restated the formula in a transfer pricing dispute: “l’administration doit être regardée comme établissant l’existence d’un avantage qu’elle est en droit de réintégrer dans les résultats de l’entreprise établie en France, sauf pour celle-ci à justifier que cet avantage a eu pour elle des contreparties aux moins équivalentes”, once the comparison shows an advantage, the administration is deemed to establish an advantage it may add back to the French company’s results, unless the company proves it received at least equivalent counter-performance (CAA Versailles, 18 November 2021, No. 19VE01727, SA Bureau Veritas). In that case the lower court had discharged several million euros of additional corporate tax and withholding tax because the administration had not quantified the advantage by valid comparisons, and the court of appeal confirmed that without such comparisons “l’administration n’est, en revanche, pas fondée à invoquer la présomption de transferts de bénéfices”, the administration is not entitled to rely on the presumption. The lesson cuts both ways. The administration cannot simply assert that a fee looks high; it must produce comparables or internal price references. But once it does, the burden reverses entirely and the French subsidiary must demonstrate, document by document, that the fee matched arm’s length conditions, meaning the conditions independent companies would have agreed in a comparable situation. Assertions about foreign legislation, group policy or the parent’s cost base do not rebut the presumption, and the court expressly held that the application by a third country of the arm’s length principle has no influence on the French assessment.
Three recurring fact patterns trigger the Article 57 presumption in management fee audits, and each calls for a different defence. The first is the cost-plus fee without a cost base: the parent charges cost plus five or ten percent but cannot show the underlying salary costs, travel costs or third-party invoices that were supposedly recharged, nor the allocation key used to split shared costs between subsidiaries. The auditor compares the French subsidiary’s operating margin with independent distributors or service companies and finds the margin abnormally thin once the fee is deducted, then adds the fee back as an abnormal advantage. The defence requires opening the parent’s cost accounting for the recharged departments, showing gross salary slips or payroll summaries for the staff concerned, the percentage of their time attributed to France, and third-party invoices where external consultants were recharged at cost. The second pattern is the duplicated function: the French subsidiary already employs a full-time chief financial officer, human resources manager or IT team, yet pays the parent for finance, HR or IT supervision covering the same tasks. The auditor treats the overlap as proof that the service brought no additional value to the French company. The defence must then draw a precise boundary between local execution and group-level expertise, for example local bookkeeping versus group consolidation under IFRS (International Financial Reporting Standards), local recruitment versus international executive search, local IT maintenance versus group cybersecurity architecture, and attach deliverables that the local team could not have produced alone. The third pattern is the shareholder activity disguised as a service: group strategy meetings, investor reporting, supervision of the French management by the parent’s board, costs of acquiring or restructuring subsidiaries, or the parent’s own legal and audit costs recharged as general management. French case law and the OECD (Organisation for Economic Co-operation and Development) transfer pricing guidelines, which French courts use as interpretive support, treat these as non-chargeable shareholder costs because they benefit the parent as owner rather than the subsidiary as customer. The company that bills them as services invites recharacterization into non-deductible dividends. A fourth aggravating factor appears when the French company is loss-making or barely profitable while paying substantial fees: the auditor reads persistent losses combined with rising fees as evidence that the fee strips the French base. That inference can be rebutted, for instance where the subsidiary is in a start-up phase with documented market-entry costs, but only with forward-looking business plans, board minutes approving the loss phase, and evidence that independent start-ups in the same sector show comparable early margins.
The standard 25 percent corporate tax rate makes every euro of disallowed fee expensive, because the principal is increased by late interest running monthly from the original due date plus penalties that depend on good or bad faith (Article 219, I of the General Tax Code: “Le taux normal de l’impôt est fixé à 25 %”). A fee of 200,000 euros per year over three audited years represents 600,000 euros of added-back base, hence 150,000 euros of corporate tax at 25 percent before interest and penalties, plus any VAT adjustment and any withholding tax if the sum is treated as a deemed distribution. The administration also has information tools that foreign groups underestimate. It can request the group’s transfer pricing master file and local file, the country-by-country report for large groups, the intercompany agreements, the general ledger details and the email boxes of the managers involved, and it can interview the French staff about who actually performed the work. Since 2024 the statute adds that where the pricing method departs from the method described in the transfer pricing documentation made available to the administration, the gap is deemed an indirect transfer unless the company proves otherwise. In practice this means a company that files a careful transfer pricing study and then bills differently from that study is worse off than a company with no study at all. The file must therefore be consistent from the first board minute to the last invoice: the services agreement, the transfer pricing method, the invoices, the accounting entries, the VAT treatment and the corporate tax return must tell the same story with the same numbers. The RCS (Registre du commerce et des societes, the French commercial court register kept by the greffe, the court clerk’s office) and the Kbis (the official registration certificate issued by the greffe proving the company’s existence) identify who can legally bind the French company, while BODACC (Bulletin officiel des annonces civiles et commerciales, the official gazette of company registrations) publishes its creation: auditors check that the person who signed the intra-group agreement had authority at the signing date. The INPI (Institut national de la propriete industrielle, the French office that now runs the Guichet unique single window for company filings) centralizes the company’s declarations, and inconsistencies between the filed accounts and the audit file are exploited. Foreign directors who treat the French subsidiary as an extension of the parent, signing agreements late and invoicing round sums without timesheets, manufacture the very presumption that Article 57 then turns against them.
II. How to answer, fix the file and contest the reassessment
A. The auditor challenges next quarter’s fees: what file proves the service and the price today?
The repair starts the day the audit notice arrives, and ideally the quarter before. First, freeze a clean evidentiary package for the open years and stop creating harmful documents. Collect the signed intra-group agreement with its appendices, the annual budgets or business plans that mention the parent’s support, the organigrams showing parent staff and French staff side by side, the CVs of the parent employees assigned to France, their employment contracts or secondment letters, their payroll records and the time allocation sheets attributing a percentage of their cost to the French subsidiary. Add the deliverables: monthly or quarterly activity reports addressed to the French management, financial models, recruitment dossiers, IT intervention logs, marketing campaigns adapted to France, legal memoranda on French matters, travel expense claims and passport stamps for trips to the French premises, and the minutes of the French board or shareholders meeting acknowledging receipt of the services. Each invoice must then point to that package: reference the agreement number, the period covered, the daily or hourly rate, the number of days, the allocation key and the annexed report. Replace round-sum invoices with computed invoices. A fee of 15,000 euros per month with no calculation will always lose to an invoice showing twelve days at 1,100 euros plus 1,800 euros of recharged third-party costs with the supplier invoice attached. Where services are genuinely shared across several subsidiaries, write the allocation key into the agreement and apply it identically every period: headcount, turnover, hours consumed or IT tickets resolved, with the spreadsheet preserved. The key must be economically sensible; allocating global costs by turnover to a French subsidiary that uses none of the corresponding service is worse than having no key at all. Keep the payment proof simple and consistent: wire transfers from the French company’s bank account to the parent, with the invoice number in the reference, reconciled each month. Netting or set-off between dividends, loans and fees is lawful but must be documented by a signed compensation agreement and mirrored in both companies’ ledgers, otherwise the auditor treats the fee as unpaid and therefore fictitious.
Second, prove the price with external points of comparison before the auditor produces his own. French courts accept functional benchmarks: quotes or contracts from independent French providers for comparable finance, HR, IT or marketing missions, salary surveys for equivalent in-house positions showing that outsourcing to the parent cost less than hiring locally, or a cost-plus calculation with a modest margin consistent with the parent’s limited risk as a service provider. The OECD guidelines recognize the comparable uncontrolled price, cost-plus and transactional net margin methods, and the BOFiP commentary follows the same hierarchy. A small French subsidiary does not need a Big Four transfer pricing study costing more than the fee itself; a short benchmarking note with three independent quotes, the parent’s cost base and the margin rationale often suffices, provided the method in the note matches the invoices. What destroys credibility is the wandering method: cost-plus in the agreement, percentage of turnover on the invoice, and a different margin in the email to the auditor. Align the three and keep them stable across years unless a written amendment explains the change. Third, separate shareholder costs from chargeable services in the accounts. Create two analytical codes: one for group governance that stays at the parent, including board supervision, consolidated accounts, investor relations, acquisition costs and the parent’s own compliance, and one for operational services to France that are recharged with proof. When the French subsidiary already has local staff in a function, either stop recharging that function or produce the escalation file showing what the parent added beyond the local team. Fourth, secure the VAT position in parallel. For each invoice determine whether the service falls under the reverse charge, in which case the French subsidiary declares both output and input VAT, or under normal invoicing with French VAT charged by a parent that has a French VAT registration. Our VAT guide explains the self-assessment lines and the supporting documents the SIE expects, and the same reality file defends both taxes at once. Fifth, check the cash repatriation alternative honestly with your adviser. If the parent’s support genuinely consists of shareholder supervision rather than operational services, the clean route is to stop the fees and distribute dividends under the applicable treaty, claiming the European exemption of Article 119 ter only where its strict conditions are met, instead of defending fees that will be recharacterized with penalties. A voluntary correction through a supplementary return, before the reassessment proposal becomes final, can reduce penalties and demonstrates good faith, whereas persisting with identical undocumented fees during the audit year almost guarantees an extension of the adjustment to the later periods.
Practical governance completes the file. Have the French subsidiary’s legal representative approve the intra-group agreement in writing and, in a SARL, comply with the regulated agreements procedure where the manager contracts with the parent shareholder. Keep the agreement, the annual fee budget and the activity reports in the French company’s records, in French or with a French translation, because auditors are entitled to work in French and foreign-language-only files slow the dialogue. Verify signatures against the Kbis so the signatory had authority on the signing date, and update the agreement whenever the scope, the rates or the allocation key change. Brief the French finance manager and the operational staff before any on-site interview: they must be able to name the parent contacts, describe the last three missions performed for France, and locate the deliverables without calling the parent. Auditors routinely ask the French team who did the work and how it helped their targets; hesitant or contradictory answers are quoted in the reassessment proposal. Finally, calendar the audit correctly. The administration must send “une proposition de rectification qui doit être motivée de manière à lui permettre de formuler ses observations ou de faire connaître son acceptation”, a reasoned reassessment proposal enabling the taxpayer to submit observations or acceptance (Article L57 of the Tax Procedure Book (Livre des procedures fiscales, LPF)), and the official service-public.fr pages on tax audits describe the thirty-day response period, extendable by thirty days on request. Use that period fully: a rushed two-page reply wastes the only moment when the auditor can still abandon the adjustment at no cost to the administration. A structured reply with numbered exhibits, a price benchmark annex and a request for a meeting with the auditor’s superior converts a file rejection into a negotiation, and even a partial concession on one year reduces the base for penalties across all years.
B. The reassessment arrives despite our evidence: how do we contest it and recover the tax?
Once the SIE notifies the reassessment, the dispute follows a rigid procedural ladder with strict deadlines, and each step must be prepared as if it were the last. The first rung is the written reply to the proposal of rectification within thirty days, extendable to sixty days on request made before expiry. The reply must answer every ground separately: reality of the services with exhibit references, benefit to the French company function by function, arm’s length character of the price with the benchmark annex, VAT deductibility, absence of any deemed distribution, and calculation errors. Attach the complete exhibit bundle with an index, because exhibits produced for the first time before the court carry less weight and suggest reconstruction. Ask expressly for an interview with the principal inspector and then with the departmental interlocutor; French procedure encourages hierarchical review, and many management fee adjustments are reduced at this stage when the file is serious. If disagreement persists, the statute provides that “Lorsque le désaccord persiste sur les rectifications notifiées, l’administration, si le contribuable le demande, soumet le litige à l’avis” of the departmental or national direct tax commission, meaning the taxpayer can require referral to an independent advisory commission (Article L59 of the Tax Procedure Book). The commission’s opinion does not bind the administration but a favourable opinion shifts the negotiation balance and is read carefully by the court. After the final assessment notice and the collection notice, the claim phase opens: a formal written claim to the tax office, generally within the time limit stated on the notice, setting out the legal grounds and the amount claimed, with proof of payment or a guarantee application where sursis de paiement, the statutory stay of collection pending the claim, is sought. Missing the claim deadline forfeits the case regardless of its merits, so foreign groups should diary the deadline on the day the notice arrives and confirm it with French counsel.
If the claim is rejected expressly or by silence, the case moves to the administrative court: the tribunal administratif (the first-instance administrative court) for the place of the French company’s registered office, then on appeal the CAA (cour administrative d’appel, the administrative court of appeal), with cassation before the Conseil d’Etat (the supreme administrative court) on points of law. Before the court the burden rules described above govern the outcome. The administration will file the comparables or internal references supporting the Article 57 presumption; the company must file the counter-proof of equivalent value. That burden rule decided the Fideclic appeal before the Paris court (CAA Paris, 10 October 2018, No. 17PA02373). The Fideclic and Bureau Veritas rulings show the two opposite endings. In Fideclic the company offered only general statements and the court held that the administration “conteste expressément la réalité des charges en cause, établit que les factures produites ne sauraient être regardées comme justifiant à elles seules de cette réalité”, expressly disputed the reality of the charges and established that the invoices alone could not prove it, so the appeal was dismissed in full with the operative part “La requête de la SARL Fideclic est rejetée” (CAA Paris, 10 October 2018, No. 17PA02373). In Bureau Veritas the administration had not produced the required price comparisons, the presumption could not be invoked, and the court rejected the minister’s appeal, ordering the State to pay costs. Foreign litigants should therefore build the court file around three pillars: dated proof of performance, functional proof of local benefit, and priced proof of arm’s length conditions, each cross-referenced to the paragraphs of the reassessment. Add a calculation annex recomputing the tax, interest and penalties year by year so the judge can grant a partial discharge even if one fee line fails. Challenge penalties separately: the deliberate failure surcharge requires proof of intent, and the automatic penalties fall if the underlying adjustment falls. Where VAT was also reassessed, plead the corporate tax and VAT grounds independently, because a service can theoretically be real for one tax and undocumented for the other, and the court examines each levy on its own evidence.
Recovery and prevention close the dispute. Tax paid under the contested assessment and later discharged is refunded with moratory interest, and the collection notices are cancelled to the extent of the discharge. Update the group policy immediately after the judgment or settlement: amend the services agreement to the method the court accepted, align invoicing with that method, and schedule an annual transfer pricing memo before the corporate tax return is filed. For large groups, verify whether the master file and country-by-country reporting thresholds apply and whether the French documentation must be renewed; for smaller groups, keep the light benchmarking note current with fresh independent quotes each year. Consider the ruling procedure for the future: a rescrit, the formal advance ruling request to the administration on the deductibility method, does not erase the past but secures later years when the facts are stable. Consider also the structural choice: where the parent’s involvement is genuinely strategic supervision, replacing monthly fees with a transparent dividend policy, priced shareholder loans within the Article 212 limits, or a secondment of named executives with French payroll and A1 certificates where applicable, often costs less in tax and risk than defending high-Head-Office fees every three years. Each of these alternatives has its own labour, social security and treaty consequences, and the URSSAF (Union de recouvrement des cotisations de securite sociale et d’allocations familiales, the social security collection agency) examines secondments and cross-border payrolls as closely as the SIE examines fees. Coordinate the tax, employment and immigration advice before moving executives or reclassifying payments. Throughout the dispute, keep the company’s public filings coherent: the accounts filed through the INPI Guichet unique, the corporate tax return, the VAT returns and the transfer pricing appendices must use identical fee totals, because a single inconsistency table in the administration’s brief can discredit an otherwise solid file. Companies that treat the French subsidiary as a real business with its own records, its own benefit analysis and its own price evidence win adjustments down or overturned; companies that treat it as a cost centre for the parent’s invoices pay the 25 percent rate on the fees, plus interest, plus penalties, plus the professional fees of a dispute they could have prevented.
Conclusion
French auditors do not reject management fees because they dislike foreign groups; they reject them because most files prove invoicing rather than service. The French subsidiary that wants its parent’s fees to survive must show three things with dated paper: the parent’s people did identifiable work, that work served the French company’s own business rather than the shareholder function, and the price matches what independent companies pay. General invoices, group policy slides and after-the-fact emails fail that test, as the Paris court confirmed when it dismissed vague exhibits that proved neither the nature, the dates nor the salaries behind the fees. The transfer pricing presumption then does the rest, unless the company answers with comparables and counter-performance as the Versailles court required. The procedure leaves a well-prepared company several genuine exits: a reasoned reply to the proposal of rectification, hierarchical review, the advisory commission, the formal claim and the administrative courts, each with its own deadline and each capable of cancelling or reducing the assessment. Foreign founders should therefore treat the fee file as part of the company’s legal calendar, alongside the AGM (assemblee generale annuelle, the annual shareholders meeting approving the accounts), the filing of accounts and the corporate tax instalments: a signed agreement before billing, computed invoices with reports, an annual benchmark note, consistent VAT treatment and coherent filings. Built that way, intra-group support lowers the French effective cost instead of doubling it through reassessment. Built on round sums and trust, it becomes the most expensive line of the profit and loss account. If the SIE is already questioning your fees, assemble the reality file now, answer within the thirty-day window, and have French counsel test the comparables before the presumption hardens into an assessment.
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Telephone consultation within 48 hours with a lawyer of the firm. Call +33 6 46 60 58 22 (Maître Reda Kohen) for an initial assessment of your management fees file, audit reply or claim deadline. You can also reach us through the contact page of kohenavocats.fr. We assist foreign groups with French subsidiaries in Paris and throughout France.