Your company in Delaware, London, Dubai or Singapore owns a French subsidiary, and every month the foreign parent sends the French company an invoice labelled management fees, technical assistance or brand royalties. The French subsidiary deducts these invoices from its taxable profit, so the French corporate tax bill shrinks while cash flows back to the parent. This arrangement is perfectly lawful, and it is also one of the most audited transactions in France. The French tax office knows that a line on an invoice can hide a disguised profit transfer, and it has a dedicated legal weapon for exactly this situation. If you live abroad and run the French company from a distance, you will not be there when the tax inspector walks in, so the file must defend itself without you. This guide explains, in order, how to make the fees deductible, how to price them at arm’s length, how to invoice them with the correct French VAT treatment, and how to answer a tax audit and challenge a reassessment from abroad, with the exact articles and court decisions that govern your file.<\/p>\n
French tax law starts from a simple principle and adds a trap for intra-group invoices. The principle is that a company deducts all its genuine operating expenses. The trap is that when the supplier sits abroad and belongs to the same group, the tax office may treat part of the invoice as profit secretly moved out of France and add it back to your taxable result, with penalties. Two questions therefore decide everything: did the parent really do something for the French company, and was the price normal. Fail either test and the deduction falls.<\/p>\n
The starting point is the general deduction rule. Article 39, paragraph 1 of the General Tax Code (code g\u00e9n\u00e9ral des imp\u00f4ts, the CGI, France’s main tax statute)<\/a> provides that net profit is computed after deducting all charges, including, notably: “Les frais g\u00e9n\u00e9raux de toute nature, les d\u00e9penses de personnel et de main-d’oeuvre, le loyer des immeubles dont l’entreprise est locataire.” General expenses of every kind are therefore deductible in principle, and an invoice for genuine management, IT, accounting, legal or commercial support from the parent falls squarely into that basket. But the same article immediately adds the condition that kills hollow invoices: “Toutefois les r\u00e9mun\u00e9rations ne sont admises en d\u00e9duction des r\u00e9sultats que dans la mesure o\u00f9 elles correspondent \u00e0 un travail effectif et ne sont pas excessives eu \u00e9gard \u00e0 l’importance du service rendu.” Fees are deductible only to the extent that they correspond to work actually performed and are not excessive in light of the importance of the service rendered. A monthly flat fee with no description, no time spent and no deliverable fails this test on its face.<\/p>\n The courts apply this test under the name of abnormal management act, or acte anormal de gestion: an expense that no prudent business owner would incur in the sole interest of the company is removed from deductible charges. A recent decision shows exactly how judges reason when a French company pays, or refuses to charge, amounts inside its group. In a ruling of 20 February 2025, case number 23LY02104<\/a>, the Lyon administrative court of appeal recalled the rule in these terms: “En vertu des dispositions combin\u00e9es des articles 38 et 209 du code g\u00e9n\u00e9ral des imp\u00f4ts, le b\u00e9n\u00e9fice imposable \u00e0 l’imp\u00f4t sur les soci\u00e9t\u00e9s est celui qui provient des op\u00e9rations de toute nature faites par l’entreprise, \u00e0 l’exception de celles qui, en raison de leur objet ou de leurs modalit\u00e9s, sont \u00e9trang\u00e8res \u00e0 une gestion normale.” Taxable profit comes from all transactions of the business except those which, by their purpose or their terms, fall outside normal management. The court then stated the burden of proof: “S’il appartient \u00e0 l’administration d’apporter la preuve des faits sur lesquels elle se fonde pour estimer que les avantages octroy\u00e9s par une entreprise \u00e0 un tiers constituent un acte anormal de gestion, elle est r\u00e9put\u00e9e apporter cette preuve d\u00e8s lors que cette entreprise n’est pas en mesure de justifier qu’elle a b\u00e9n\u00e9fici\u00e9 en retour de contreparties.” The tax office is deemed to prove an abnormal act as soon as the company cannot show what it received in return. In that case the French company had borne a 340,845 euro commission paid to its parent without recharging it to the sister companies that actually benefited, and the court confirmed the add-back because no counterparty benefit was demonstrated and the interest of the group alone was not enough.<\/p>\n For a foreign founder, the practical lesson is that every management-fee invoice must be backed by a paper trail proving reality: a written intra-group services agreement signed before the services start, describing each service line by line, monthly or quarterly activity reports, timesheets or consultant logs, emails showing instructions given and received, travel records when the parent’s staff come to France, and evidence that the French subsidiary actually used the deliverables in its own business. Duplicate charges are the classic failure: if the French company already employs a local accountant, a full-time parent invoice for accounting supervision looks like paying twice for the same job, and the inspector will ask what the parent added. Shareholder activities are the second classic failure: the costs of owning shares, supervising the investment, organising board meetings and producing consolidated accounts serve the parent as shareholder, not the subsidiary as client, and France does not let the subsidiary deduct them. Your agreement should therefore separate shareholder supervision, which stays with the parent, from operational services actually consumed by the French company, and the pricing should follow that split.<\/p>\n A special warning applies when the parent sits in a low-tax jurisdiction. Article 238 A of the General Tax Code<\/a> targets payments made to persons established in a foreign state with a privileged tax regime, and it provides that such service fees “ne sont admis comme charges d\u00e9ductibles pour l’\u00e9tablissement de l’imp\u00f4t que si le d\u00e9biteur apporte la preuve que les d\u00e9penses correspondent \u00e0 des op\u00e9rations r\u00e9elles et qu’elles ne pr\u00e9sentent pas un caract\u00e8re anormal ou exag\u00e9r\u00e9.” The French subsidiary must then affirmatively prove that the operations are real and neither abnormal nor exaggerated. If your group routes services through an entity in a jurisdiction France treats as privileged or non-cooperative, expect the inspector to invoke this article first and prepare the proof file accordingly, because the burden is heavier there than in an ordinary intra-group case.<\/p>\n Proving that the work was real is only half the battle. The price must also be the price that independent companies would have agreed, the arm’s length price, or prix de pleine concurrence. The legal weapon is Article 57 of the General Tax Code<\/a>, which states: “Pour l’\u00e9tablissement de l’imp\u00f4t sur le revenu d\u00fb par les entreprises qui sont sous la d\u00e9pendance ou qui poss\u00e8dent le contr\u00f4le d’entreprises situ\u00e9es hors de France, les b\u00e9n\u00e9fices indirectement transf\u00e9r\u00e9s \u00e0 ces derni\u00e8res, soit par voie de majoration ou de diminution des prix d’achat ou de vente, soit par tout autre moyen, sont incorpor\u00e9s aux r\u00e9sultats accus\u00e9s par les comptabilit\u00e9s.” Profits indirectly transferred abroad through inflated purchase prices or any other means are added back to the French company’s declared results. An excessive management fee is treated exactly like an inflated purchase price: the excess over the normal price is deemed profit moved to the parent and taxed in France as if it had never left.<\/p>\n The Conseil d’\u00c9tat, France’s supreme administrative court, has explained how this presumption works in practice. In a leading transfer-pricing decision of 6 June 2018, case number 409645<\/a>, concerning a French distributor wholly owned by an American group, the court held: “lorsqu’elle constate que les prix factur\u00e9s \u00e0 une entreprise \u00e9tablie en France par une entreprise \u00e9trang\u00e8re qui lui est li\u00e9e sont sup\u00e9rieurs \u00e0 ceux pratiqu\u00e9s, soit par cette entreprise avec d’autres clients d\u00e9pourvus de liens de d\u00e9pendance avec elle, soit par des entreprises similaires exploit\u00e9es normalement avec des clients d\u00e9pourvus de liens de d\u00e9pendance, sans que cet \u00e9cart ne s’explique par la situation diff\u00e9rente de ces clients, l’administration doit \u00eatre regard\u00e9e comme \u00e9tablissant l’existence d’un avantage qu’elle est en droit de r\u00e9int\u00e9grer dans les r\u00e9sultats de l’entreprise \u00e9tablie en France, sauf pour celle-ci \u00e0 justifier que cet avantage a eu pour elle des contreparties aux moins \u00e9quivalentes.” When the tax office shows that the related foreign supplier charges the French company more than it charges independent customers, or more than comparable independent companies charge each other, without any difference in situation explaining the gap, the existence of an advantage is established and the company can only escape by proving counterparty benefits of at least equivalent value. The same decision confirms that Article 57 applies to corporate income tax through Article 209 of the same code, so every French subsidiary paying its foreign parent falls inside this regime.<\/p>\n In concrete terms, you should choose a pricing method before the invoices start and write it down. The French administration’s published transfer-pricing guide, available on impots.gouv.fr, the official website of the French tax administration<\/a>, describes the documentation companies must hold, including the transfer-pricing file required by Article L. 13 AA of the Tax Procedure Code (livre des proc\u00e9dures fiscales, the LPF, the statute governing audits and disputes) and the country-by-country report for multinational groups with consolidated turnover of at least 750 million euros. Even below the formal documentation thresholds, a short transfer-pricing memorandum in your file changes the balance of power: it shows the method chosen, the comparable companies or cost base used, and why the margin is normal. The commonly accepted methods are the comparable uncontrolled price, where you benchmark the parent’s hourly rates against independent providers in the same market, and the cost-plus method, where the parent’s internal cost of providing the service is increased by a modest arm’s length mark-up. What the administration rejects are circular methods, such as guaranteeing the foreign supplier a fixed margin while the French distributor bears all the commercial risk, which is precisely the cost-plus construction the Conseil d’\u00c9tat struck down in the 2018 General Electric case. Keep the benchmark study, update it every two to three years, and make sure the invoices match the method: if the memorandum says cost plus 8 percent, the invoices should show the cost base and the mark-up, not a round number that appears from nowhere.<\/p>\n Many foreign founders hesitate between funding the French company with management fees and funding it with a shareholder loan, the compte courant d’associ\u00e9, meaning the current-account advance a shareholder leaves at the disposal of the company. The two tools obey different tax ceilings. Loan interest paid to a related foreign lender is deductible only within strict limits set by Article 212 of the General Tax Code<\/a>, which opens with this rule: “Les int\u00e9r\u00eats aff\u00e9rents aux sommes laiss\u00e9es ou mises \u00e0 disposition d’une entreprise par une entreprise qui est son associ\u00e9e ou par une entreprise li\u00e9e, directement ou indirectement, au sens du 12 de l’article 39, sont d\u00e9ductibles”. Interest on sums left or made available to a company by its shareholder or a related company is deductible, but only within the rate and thin-capitalisation caps that follow in that article. Management fees have no statutory rate cap, but they carry the heavier proof burden of real services and normal price described above. In practice, groups often combine both: a documented loan for cash needs at a lawful interest rate, plus service fees strictly limited to services actually rendered and benchmarked. Do not disguise a profit repatriation as either one, because the inspector recharacterises the excess in both cases.<\/p>\n A deductible fee can still cost you money if the invoice is irregular or the VAT is mishandled. French commercial law requires a proper invoice for every transaction, the VAT on cross-border services follows a reverse-charge mechanism that surprises many foreign groups, and the audit itself obeys a procedure with strict deadlines you can use even from another continent. This second part walks through each step.<\/p>\n Every service must be invoiced, including services between companies of the same group. Article L. 441-9 of the Commercial Code (code de commerce, the statute governing business transactions)<\/a> states the rule bluntly: “Tout achat de produits ou toute prestation de service pour une activit\u00e9 professionnelle fait l’objet d’une facturation.” The seller must issue the invoice as soon as the service is performed and each party keeps a copy. An intra-group memo, a cost allocation note or a year-end lump-sum adjustment without an invoice does not satisfy this requirement, and the absence of invoices is the first thing an inspector notes when challenging the reality of the services. Your parent’s invoices should therefore carry the names and addresses of both companies, the date of the service, a precise description of each service line, quantities and unit prices excluding VAT, the applicable VAT treatment, and the intra-Community VAT numbers of both parties when both sit inside the European Union. Generic wording such as management fees with no detail, or a single annual invoice issued in December covering twelve months of unspecified assistance, undermines both deductibility and credibility.<\/p>\n The VAT treatment then depends on where the parent is established. When a foreign taxable person supplies services to a French taxable customer, France generally does not ask the foreign supplier to charge French VAT. Instead, the French subsidiary self-assesses the tax itself. Article 283 of the General Tax Code<\/a> provides: “lorsqu’une livraison de biens ou une prestation de services mentionn\u00e9e \u00e0 l’ article 259 A est effectu\u00e9e par un assujetti \u00e9tabli hors de France, la taxe est acquitt\u00e9e par l’acqu\u00e9reur, le destinataire ou le preneur qui agit en tant qu’assujetti et qui dispose d’un num\u00e9ro d’identification \u00e0 la taxe sur la valeur ajout\u00e9e en France.” The French customer, acting as a taxable person with a French VAT identification number, pays the tax, and the amount is shown on the return mentioned in Article 287. For services covered by Article 259, paragraph 1, supplied by a provider not established in France, the same article adds that the tax must be paid by the customer. This mechanism is called autoliquidation, or reverse charge: the subsidiary declares the French VAT due on the foreign invoice and simultaneously deducts it on the same VAT return, the CA3, to the extent its own activity gives a right to deduct, so the operation is often cash-neutral but never declaration-neutral.<\/p>\n The official business guidance on service-public.fr, the French government’s public service website<\/a>, confirms the invoicing consequence in English: where the seller has no French VAT number, it must bill excluding tax and the French customer self-assesses, and the invoice must carry the reverse-charge wording. In practice, the parent’s invoice should therefore show the net amount with the words autoliquidation or reverse charge, no French VAT charged, and the French subsidiary reports the purchase on its CA3 return in both the collected-VAT and deductible-VAT boxes. Three errors recur in foreign-owned files. First, the subsidiary forgets to declare the reverse charge at all, which draws an automatic VAT reassessment even though the net cash effect would have been zero. Second, the parent charges its local VAT, for example British, American or Emirati tax logic applied by mistake, on top of the fee, and the French company wrongly tries to recover foreign tax on a French return instead of using the reverse charge. Third, when the French subsidiary itself benefits from the small-business VAT exemption, the franchise en base, it cannot deduct the self-assessed VAT, so the reverse charge becomes a real cost that must be priced into the fee from the start. Ask your French accountant each quarter for written confirmation that the foreign invoices were processed in autoliquidation on the CA3, because this is the single most frequent adjustment in files like yours.<\/p>\n A transfer-pricing challenge almost always arrives inside a v\u00e9rification de comptabilit\u00e9, the on-site audit of your accounts, which the tax office opens for a defined period and defined taxes. One protection matters immediately: Article L. 51 of the Tax Procedure Code<\/a> provides: “Lorsque la v\u00e9rification de comptabilit\u00e9 ou l’examen de comptabilit\u00e9, pour une p\u00e9riode d\u00e9termin\u00e9e, au regard d’un imp\u00f4t ou d’une taxe ou d’un groupe d’imp\u00f4ts ou de taxes, est achev\u00e9, l’administration ne peut proc\u00e9der \u00e0 une v\u00e9rification de comptabilit\u00e9 ou \u00e0 un examen de comptabilit\u00e9 de ces m\u00eames \u00e9critures au regard des m\u00eames imp\u00f4ts ou taxes et pour la m\u00eame p\u00e9riode.” Once an audit of given entries for given taxes and a given period is finished, the administration cannot audit the same entries again for the same taxes and period. Keep every audit notice and closure letter, because a second attempt on already-audited years can be stopped with this article.<\/p>\n During the audit, the inspector who suspects a transfer of profits can demand targeted explanations. Article L. 13 B of the Tax Procedure Code<\/a> states: “Lorsque, au cours d’une v\u00e9rification de comptabilit\u00e9 ou d’un examen de comptabilit\u00e9, l’administration a r\u00e9uni des \u00e9l\u00e9ments faisant pr\u00e9sumer qu’une entreprise, autre que celles mentionn\u00e9es au I de l’article L. 13 AA, a op\u00e9r\u00e9 un transfert indirect de b\u00e9n\u00e9fices, au sens des dispositions de l’ article 57 du code g\u00e9n\u00e9ral des imp\u00f4ts, elle peut demander \u00e0 cette entreprise des informations et documents pr\u00e9cisant : 1\u00b0 La nature des relations entrant dans les pr\u00e9visions de l’article 57 du code g\u00e9n\u00e9ral des imp\u00f4ts, entre cette entreprise et une ou plusieurs entreprises exploit\u00e9es hors de France ou soci\u00e9t\u00e9s ou groupements \u00e9tablis hors de France ; 2\u00b0 La m\u00e9thode de d\u00e9termination des prix des op\u00e9rations de nature industrielle, commerciale ou financi\u00e8re qu’elle effectue avec des entreprises, soci\u00e9t\u00e9s ou groupements vis\u00e9s au 1\u00b0 et les \u00e9l\u00e9ments qui la justifient ainsi que, le cas \u00e9ch\u00e9ant, les contreparties consenties” The company must then describe the nature of its relations with the foreign related entities and the pricing method used. You do not need to be in Paris to answer: your French lawyer and accountant reply in French within the deadline, sending the services agreement, the benchmark study, the invoices and the proof of payment. Late, vague or English-only answers with no translation waste the one procedural moment when a well-documented file can still stop the reassessment before it is issued.<\/p>\n If the inspector maintains the adjustment, the administration must send a reasoned correction notice. Article L. 57 of the Tax Procedure Code<\/a> requires: “L’administration adresse au contribuable une proposition de rectification qui doit \u00eatre motiv\u00e9e de mani\u00e8re \u00e0 lui permettre de formuler ses observations ou de faire conna\u00eetre son acceptation.” The notice must be reasoned so that you can reply or accept, and on your request made before the expiry of the period mentioned in Article L. 11, that period is extended by thirty days. Use that reply period fully: contest the comparables, show the counterparty benefits the subsidiary received, and demonstrate the method with figures, because everything you write becomes evidence before the courts. If the adjustment is confirmed, you may appeal to the higher administrative reviewer, the interlocuteur d\u00e9partemental, then file a formal claim, the r\u00e9clamation, and finally bring the case before the administrative court, the tribunal administratif, and on appeal before the cour administrative d’appel, exactly as the companies in the Lyon and Conseil d’\u00c9tat cases above did. Deadlines run in months, not years, so instruct your counsel from abroad the day the correction notice arrives, sign powers of attorney electronically, and never let a French-language registered letter sit unopened at the company’s seat: appoint a person in France who forwards every official letter the same day.<\/p>\n Management fees from a foreign parent are deductible in France when three conditions meet: the services are real and documented, the price matches what independent companies would pay, and the invoice and VAT treatment are correct. The file that survives is built before the audit, not during it: a precise services agreement, activity reports and timesheets proving effective work, a short benchmark study supporting the price, compliant invoices mentioning reverse charge, and CA3 returns showing the self-assessed VAT. With that file, a v\u00e9rification de comptabilit\u00e9 ends in a negotiation between professionals; without it, Article 57 adds the fees back to your profit, penalties follow, and you defend the case from abroad with empty hands. If your parent already invoices your French subsidiary, have the file reviewed now, while corrections are still cheap. If the invoices have not started, put the agreement and the pricing method in place first, because the first year’s structure decides how the next five years will be taxed.<\/p>\n For a first review of your management-fee file, our firm offers an initial phone consultation for 80 EUR incl. VAT within 48 hours with an attorney of the firm. Call +33 6 46 60 58 22<\/a> or write via our contact page<\/a>. We assist foreign groups with French subsidiaries from Paris and across \u00cele-de-France, entirely in English, from the services agreement to the audit reply.<\/p>\n","protected":false},"excerpt":{"rendered":" Foreign parent charging your French subsidiary monthly management fees? How to prove real services, set an arm’s length transfer price, self-assess French VAT by reverse charge, and challenge a tax reassessment from abroad.<\/p>\n","protected":false},"author":251031309,"featured_media":16403,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_kj_source_type":"","_kj_official_id":"","_kj_official_url":"","_kj_judilibre_id":"","_kj_jur":"","_kj_lieu":"","_kj_chambre":"","_kj_rg":"","_kj_date":"","activitypub_content_warning":"","activitypub_content_visibility":"","activitypub_max_image_attachments":4,"activitypub_interaction_policy_quote":"anyone","activitypub_status":"federated","footnotes":""},"categories":[80314,80313],"tags":[],"class_list":["post-2128843","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-decryptage","category-doing-business-in-france"],"yoast_head":"\nB. How to set a transfer price the French tax office accepts<\/h3>\n
II. Invoice Correctly, Handle French VAT, Then Win the Audit From Abroad<\/h2>\n
A. How to invoice the French subsidiary and self-assess French VAT on foreign-billed services<\/h3>\n
B. How to answer a transfer-pricing audit and challenge the reassessment without living in France<\/h3>\n
Conclusion<\/h2>\n
Need a quick opinion on your case<\/h2>\n