Specifically, article 57 of the General Tax Code allows the administration to tax profits indirectly transferred abroad through exchanges between companies of the same group.

The Council of State found that these provisions are applicable to a French branch of a company whose head office is abroad even though the branch has no legal entity.

In this case, the profits in question were the interest on the advance payment granted by the branch to its head office. The interest was not accounted for in these advances which were recorded in the branch’s accounts established in France for taxation purposes.

Therefore, the tax administration considering that the absence of interest provision by the branch to its head office was not justified, re-entered the interest omitted in the invoicing into the branch’s taxable result.