Inter-Company Subsidies / Grants

Grants between sister-companies

In a recent decision, the Administrative Court of Appeal of Paris (C.A.A. June 29, 1995) considered that the interest of the group and the policy conducted by the parent company are not enough to give a normal feature to a minority investment performed by a subsidiary A of the group into a sister-company B in a tax loss position, as this operation does not present any interest for the company A but the aim of which is company A bears a part of the financial expenses generated by the losses of company B.

Thus, neither the reserves made up owing to the irrecoverable nature of advances granted by A to B immediately after the investment, nor the loss resulting from the sale, the year after, of the receivable held on B at 10% of its nominal value, may give rise to a deduction of the results of A, insofar as the latter operations are the consequences of an act not meeting the arm's length principle.