In the Amycel ruling, the French Administrative Supreme Court restates a well-established principle in case law with respect to the burden of proof in transfer pricing matters: when the tax authorities find that the prices at which an enterprise established in France invoices an foreign associated enterprise are lower than those used either by this enterprise with other clients which are independent, or by similar enterprises operated normally with clients who are not in a dependent relationship with them—where this difference does not result from the different situation of these clients —the tax authorities must be regarded as proving the existence of an advantage they have the right to add back into the tax result of the enterprise established in France, unless such enterprise proves that this advantage resulted in at least equivalent compensations.
In this case, Amycel France’s business was the production and marketing of mycelium, which it sold to two sister companies, a Dutch company, Amycel BV, and a British company, Amycel UK. Further to a tax audit, the tax authorities concluded that the prices used with Amycel BV and Amycel UK were lower than those used vis-à-vis companies outside the group. They reassessed the tax results of the audited fiscal years considering that profits had indirectly been transferred to Amycel BV and Amycel UK.
As the Orléans Administrative Court, then the Nantes Administrative Court of Appeal, ruled in favor of the tax authorities, the company appealed the decision of the Court of Appeal to the French Administrative Supreme Court.
In its decision, the French Administrative Supreme Court acknowledges that the tax authorities demonstrated that the prices at which Amycel France had invoiced its foreign sister companies were lower than those used with its other clients who were not in a dependent relationship with it. Nevertheless, the Administrative Supreme Court invalidates the Court of Appeal’s decision, stating that the tax authorities did not determine whether Amycel BV and Amycel UK, who were distributors, were in the same situation as the other clients selected to compare prices, who were end consumers. According to Amycel France, this difference in the distribution chain explained the pricing difference.
It should be noted that the company argued that the pricing advantages granted to its sister companies were compensated by the assumption by the sister companies of marketing, delivery, storage, advertising and overhead expenses, and through compensations from the group’s American parent company. However, the French Administrative Supreme Court did not have to make a ruling on the issue of these compensations because there was no presumption of a transfer of profits abroad.