France vs Calliope SARL, May 2026, Paris Administrative Court of Appeal, Case No 24PA03817
Table of Contents
Case Information
Court: Cour Administrative d'Appel de Paris, 9ème chambre
Case number: 24PA03817
Citation: CAA de PARIS, 9ème chambre, 18/05/2026, 24PA03817, Inédit au recueil Lebon
Applicant: SARL Calliope
Respondent: Ministre de l'économie, des finances et de la souveraineté industrielle et numérique
Jurisdiction: France
Judgment date: 18 May 2026
Judgment Summary
SARL Calliope appealed against jugement n° 2204276 of 24 June 2024 by which the Tribunal Administratif de Paris had rejected its claims. The company sought reinstatement of its carry-forward deficit for the financial year ended 2016 (totalling 1 915 168 euros) and discharge of additional cotisation sur la valeur ajoutée des entreprises and withholding taxes for the years 2016 to 2018, together with the corresponding surcharges.
The court confirmed the first-instance judgment in its entirety, holding that the tax authority had correctly established an indirect transfer of profits to the Italian group companies Teddy A. and Miss Miss SRL within the meaning of Article 57 of the code général des impôts. The court found that SARL Calliope had not rebutted the statutory presumption of transfer and had not demonstrated that any advantage granted to those companies was justified by the receipt of consideration.
Background
SARL Calliope commenced, from 2001, a wholesale activity selling clothing and accessories under the brands 'Rinascimento' and 'Miss Miss', owned respectively by its suppliers, the Italian companies Teddy A. and Miss Miss SRL [§1]. From 2013 to 2016, it also carried on a retail activity selling clothing of the same group's brands [§1].
All three companies, Calliope, Teddy A. and Miss Miss SRL, were directly or indirectly held by the Italian company TetM B. A., the holding company of the Teddy group, which specialised in textiles. TetM B. A. held 99% of Teddy A., which in turn held 100% of SARL Calliope [§3, §4].
Following an accounting audit (vérification de comptabilité) covering the financial years ended 2016, 2017 and 2018, the tax authority concluded that SARL Calliope had, between 2012 and 2018, indirectly transferred profits to Teddy A. and Miss Miss SRL, with which it had a dependence relationship within the meaning of Article 57 of the code général des impôts [§1].
The authority remis en cause the carry-forward deficits for financial years 2012 to 2015, at due concurrence, up to a total of 1 915 168 euros, which was the carry-forward deficit recorded at the opening of the first non-time-barred financial year. It also corrected the declared deficit results for the three audited years and subjected SARL Calliope to additional cotisation sur la valeur ajoutée des entreprises for 2016 to 2018, increased by late-payment interest. Furthermore, the authority treated the indirectly transferred and reintegrated profits as hidden distributions (avantages occultes) under Article 111 c) of the code général des impôts and imposed withholding taxes (retenues à la source) under Article 119 bis 2 of the same code, increased by late-payment interest and a 10% penalty under Article 1728 a) 1 [§1].
Core Dispute
The central question was whether SARL Calliope had indirectly transferred profits to Teddy A. and Miss Miss SRL by performing, without remuneration, functions of brand promotion and valorisation of the marks 'Rinascimento' and 'Miss Miss', in addition to its role as a routine distributor, thereby falling within Article 57 of the code général des impôts [§2, §11].
The company argued that it was solely a routine distributor exposed to limited risks, that it had exercised no brand valorisation function, that the tax authority had not established a causal link between its deficit and any assumed service to the group, and that its transfer prices had been determined using the resale price method (prix de revente minoré), which the authority had itself acknowledged showed gross margins in line with the market [§ pages 2-3].
The authority applied the transactional net margin method (méthode transactionnelle de la marge nette) to compare SARL Calliope's net operating margin ratios against those of a panel of independent comparable companies, and contended that Calliope's structural net losses demonstrated an unremunerated advantage conferred on the group [§7].
Court Findings
The court confirmed that the dependence relationship between SARL Calliope and Teddy A. and Miss Miss SRL was not disputed [§3].
On the functional analysis, the court found that, contrary to its characterisation of itself as a routine distributor, SARL Calliope also performed functions of promotion and valorisation of the brands 'Rinascimento' and 'Miss Miss', as well as clientele development for Teddy A. and Miss Miss SRL, and that these functions were not remunerated [§4].
The court established that Teddy A. and Miss Miss SRL controlled all strategic and commercial decisions, assumed inventory risk and logistics, and imposed their directives on Calliope, which had no autonomy and bore only market risk and credit risk [§5]. Nevertheless, Calliope maintained a six-floor premises of 1 795 m² in the Sentier district of Paris, employed twenty-one staff, and bore loyer and payroll costs representing respectively 7.13% and 11.36% of its turnover, compared with averages of 2.64% and 6.08% for independent comparable distributors [§6].
The court noted that Teddy A. and Miss Miss SRL recorded profitable results throughout 2012 to 2018 while Calliope recorded structurally negative net results, with operating margin ratios ranging from -6.76% (2012) to -10.49% (2018) [§6, §7]. Calliope was kept afloat through successive recapitalisations and current-account advances from Teddy A., totalling, among other amounts, 713 690 euros in 2015, 4 730 052 euros in 2016, 2 009 549 euros in 2017 and 1 153 183 euros in 2018 [§6].
The court validated the authority's use of the transactional net margin method, finding that the panel of comparable companies comprised independent companies operating as distributors at limited risk in the intercompany wholesale trade in clothing and footwear, in a similar market situation [§7]. The panel comprised ten to sixteen comparables for years 2012 to 2017 and five for 2018, the reduction being due to absence of sufficient data for the rolling three-year average, a point the court found was not seriously contested [§7]. The court rejected Calliope's submission that the panel was insufficient in number [§7].
The court rejected the argument that the structural net losses were explained by the decline in market share of the Sentier district and the resulting fixed-cost pressure, noting in part that part of the decline was attributable to the 2011 assignment to Teddy A. of distribution contracts Calliope had concluded with Canadian, Belgian, Irish and Portuguese distributors, and that Calliope produced no data on its net margins prior to that assignment [§8].
The court also rejected the submission that publicity expenditure represented only a minor share of operating costs, finding that brand valorisation was also exercised through premises rental costs and commissions paid to commercial agents operating on the French market, both of which increased notably over the period [§9].
On the proposed profit-split method (méthode transactionnelle du partage des bénéfices), the court held that Calliope remained a routine distributor exposed to limited risks and had not shown it made a unique and high-value contribution, nor that its contribution could not be evaluated in isolation. It also found that Calliope had provided no precise supporting material for its allegations concerning the importance of the contributions it received from Teddy A. and Miss Miss SRL, and that the panel used by the authority contained no company with a negative operating result, a circumstance the court found irrelevant because the margin ratios, not the net-result sign, were the comparator used [§6, §10].
The court concluded that the authority had established that, by not charging for the costs of clientele development and brand valorisation, Calliope had indirectly transferred profits to Teddy A. and Miss Miss SRL within the meaning of Article 57, and that Calliope had neither established nor alleged that the advantages so conferred were justified by the receipt of consideration, so it had not rebutted the statutory presumption [§11].
Outcome
The court rejected the appeal in its entirety [§12, Article 1er]. The conclusions seeking reinstatement of the carry-forward deficit of 1 915 168 euros as at the opening of the financial year ended 2016 were dismissed. The conclusions seeking discharge of the additional cotisation sur la valeur ajoutée des entreprises and retenues à la source for 2016 to 2018 and the corresponding surcharges were dismissed. The claim for 10 000 euros under Article L. 761-1 of the code de justice administrative was also rejected as a consequence [§12].
TP Method Highlighted
The tax authority applied the transactional net margin method (méthode transactionnelle de la marge nette), using the ratio of operating profit to turnover as the financial indicator [§7].
The authority computed, for each audited year and each panel company, the average of the profitability ratios for the preceding three years. It then determined the interquartile range and the median for each year, which it used as the benchmark for the reassessments. The medians were: 2.41% (2012), 2.58% (2013), 3.11% (2014), 3.03% (2015), 3.32% (2016), 3.42% (2017) and 5.13% (2018), against Calliope's ratios ranging from -6.76% to -10.49% [§7].
The panel comprised independent companies performing limited-risk distributor functions in the intercompany wholesale trade of clothing and footwear in a similar market situation, comprising ten to sixteen companies for 2012 to 2017 and five for 2018 [§7].
Calliope had proposed the resale price method (prix de revente minoré) for the wholesale activity, and separately argued for the profit-split method (méthode transactionnelle du partage des bénéfices) on the basis that it had made unique and valuable contributions. Both alternative methods were rejected by the court [§10, pages 2-3].
The court noted that the authority had acknowledged that Calliope's gross margins under the resale price method were in line with the market, but held that this did not preclude the authority from applying the net margin method to identify the structural net loss attributable to unremunerated functions [page 3].
Major Issues / Areas of Contention
- Whether SARL Calliope exercised functions of brand promotion and valorisation of 'Rinascimento' and 'Miss Miss' in addition to routine distribution, without receiving remuneration for those functions [§4, §11].
- Whether the dependence relationship between SARL Calliope and Teddy A. / Miss Miss SRL, and an indirect transfer of profits, were established under Article 57 of the code général des impôts [§2, §11].
- Whether the statutory presumption of indirect profit transfer under Article 57 was rebutted by evidence that the advantages were justified by the receipt of consideration [§11].
- Whether the transactional net margin method was the appropriate transfer pricing method, or whether the resale price method or the profit-split method should have been applied instead [§7, §10].
- Whether the panel of comparable companies used by the authority was sufficiently large and comparable [§7].
- Whether the exclusion from the panel of companies with negative operating results invalidated the benchmark [§6].
- Whether the structural net losses of SARL Calliope were explained by commercial market factors (decline of the Sentier district) rather than unremunerated services to the group [§8].
- Whether SARL Calliope made a unique and high-value contribution that justified application of the profit-split method [§10].
- Whether the carry-forward deficits for years 2012 to 2015 were validly remis en cause up to the amount of 1 915 168 euros [§1, §12].
- Whether the reintegrated profits constituted hidden distributions (avantages occultes) under Article 111 c) of the code général des impôts, attracting withholding tax under Article 119 bis 2 and a penalty under Article 1728 a) 1 [§1].