France vs Coupole Finance, March 2026, Administrative Court of Appeal of Nantes, Case No 25NT01793
Table of Contents
Case Information
Court: Administrative Court of Appeal of Nantes, 1st Chamber (CAA de Nantes, 1ère chambre)
Case number: 25NT01793
Citation: CAA de Nantes, 1ère chambre, 24/03/2026, 25NT01793, Inédit au recueil Lebon
Applicant: Société Coupole Finance (Luxembourg law company)
Respondent: French State (Minister of Public Action and Public Accounts)
Jurisdiction: France
Judgment date: 24 March 2026
Judgment Summary
Coupole Finance, a Luxembourg law company incorporated on 31 July 2000 and directed by Mr and Mrs A, carried on activities relating to the design, production, sale, distribution and construction of spherical houses. The French tax authority conducted an accounting audit of the company's permanent establishment in France, located at the registered office of its subsidiary SARL Domespace International in Quimper (Finistère), covering the period 1 January 2003 to 31 December 2010.
By a rectification proposal dated 25 July 2016, the authority reconstructed the results of the permanent establishment and issued assessments to corporate income tax for financial years 2003 to 2010 and VAT for the year 2006. Those assessments were accompanied by late-payment interest and an 80% penalty under article 1728-1(c) of the Code général des impôts (CGI) for concealed activity. Taxes were placed in collection on 15 February 2017.
After a claim filed on 15 September 2021 was rejected on 4 May 2022, Coupole Finance applied to the Administrative Tribunal of Rennes for discharge of the assessments. That tribunal rejected the application on 7 May 2025. Coupole Finance then appealed to the Administrative Court of Appeal of Nantes, which dismissed the appeal on 24 March 2026.
Background
Coupole Finance was incorporated under Luxembourg law on 31 July 2000. It held exclusive licensing rights over designs, models and domain names created by Mr and Mrs A, under a 49-year exclusive licence agreement signed on 5 September 2000, in return for an annual royalty of 27,440 euros payable to Mr and Mrs A.
The company owned no immovable property in Luxembourg and used only a domiciliation address there. It employed no staff and had no specific means of operation in Luxembourg. Its business consisted of signing exclusive commercial concession contracts for use of the models created by Mr A, who resided in Quimper, held a power of attorney over the company's bank account, and was its sole administrator responsible for promoting his inventions.
A contract for the transfer of know-how, sale and distribution was signed on 18 December 2001 between Coupole Finance and SARL Domespace International, whose manager was Mrs A. Under article 7 of that contract, royalties were due on every sale but payment was deferred until SARL Domespace International achieved a positive result of at least 100,000 euros. Approximately fifteen further master-concession contracts were concluded between Coupole Finance and foreign companies. Those contracts generated revenue of 740,248 euros over the period 2005 to 2010, rising from 20,155 euros in 2005 to 497,811 euros in 2011.
Coupole Finance failed to file the tax declarations required in France despite formal notices to do so issued on 21 April 2011, 26 May 2011, 10 June 2011 and 22 June 2011. It did not register its French activity with a business formalities centre or with the commercial court registry.
Core Dispute
The central questions before the court were: (1) whether Coupole Finance had a permanent establishment in France for corporate income tax purposes under article 209 CGI and under the Franco-Luxembourg double tax treaty signed on 1 April 1958, and whether it had its place of business in France for VAT purposes under article 259 CGI; (2) whether the extended ten-year limitation period for concealed activity applied under articles L. 169 and L. 176 of the Livre des procédures fiscales (LPF); (3) whether the company bore the burden of proof because it had been assessed by default; (4) whether unrealised royalties receivable from SARL Domespace International should have been included in taxable income; (5) whether the rights arising from the exclusive licence agreement of 5 September 2000 constituted fixed intangible assets to be brought onto the balance sheet; (6) whether the VAT assessment on the service invoice of 6 July 2006 issued to SARL Intérieurs Cuir Prestiges (ICP) was well-founded; and (7) whether the 80% penalty for concealed activity was lawfully applied.
Court Findings
On the existence of a permanent establishment in France, the court held that all strategic and economic activity of Coupole Finance was conducted from France, from the premises of SARL Domespace International and through Mr A's activities in France. Mr A resided in Quimper, administered the company, held a bank mandate and was solely responsible for promoting the company's inventions. The company had no clients in Luxembourg. The court held that the facts established a management seat (siège de direction) at the director's domicile in France, constituting a permanent establishment within the meaning of the Franco-Luxembourg treaty and an enterprise operated in France within the meaning of article 209 CGI. The same reasoning led the court to hold that the place of supply of services for VAT purposes was France under article 259 CGI.
On the burden of proof, the court held that because Coupole Finance had not filed declarations for corporate income tax or VAT despite the formal notices of 2011 and had been assessed by default, it bore the burden of demonstrating the excessive nature of the assessments under articles L. 193 and R. 193-1 LPF.
On the limitation period, the court found that the company had neither filed the required declarations in France nor registered its activity with a French business formalities centre or commercial court registry. Its activity in France was therefore deemed concealed. Registration in Luxembourg did not constitute an excusable error, particularly as the company did not invoke a comparable level of taxation in Luxembourg, and the information-exchange clause in article 22 of the Franco-Luxembourg treaty, in the version applicable before the amending protocol signed in Paris on 3 June 2009, restricted exchanges to information necessary for applying the treaty that did not reveal any secret, including bank secrecy, which was insufficient to ensure communication to the French administration of all information necessary for the application of French tax law. Accordingly, the ten-year extended right of recovery under articles L. 169 and L. 176 LPF applied.
The court also held that article L. 169 LPF was compatible with EU law, including article 2 of the Treaty on European Union, article 21 of the Charter of Fundamental Rights of the European Union (non-discrimination), the freedom of establishment, and article 54 of the Treaty on the Functioning of the European Union, since that provision applied equally regardless of the law under which a company was incorporated or the apparent location of its management seat.
On the omission of royalty income from SARL Domespace International, the court held that article 7 of the contract of 18 December 2001 expressly provided that royalties were due on every sale, with only payment deferred until the subsidiary's results exceeded 100,000 euros. Coupole Finance was therefore required to recognise a receivable in its accounts as sales were made by SARL Domespace International. The company had not substantiated its claim that the subsidiary's financial difficulties justified the omission. The authority was therefore entitled to reintegrate the corresponding royalties into taxable income for the years in dispute.
On the intangible asset question, the court found that the rights arising from the exclusive licence of 5 September 2000 constituted fixed intangible assets. The fifteen master-concession contracts produced revenue of 740,248 euros over 2005 to 2010 on a steadily rising basis. The licence ran for 49 years, and the contractual right of termination available to the licensor under article 14 of the licence was limited to two cases only: breach of contract by Coupole Finance or the opening of insolvency proceedings against it. The court rejected the argument that an intuitu personae clause in the subsidiary's sub-concession contract denied the pérennité suffisante of the income stream, noting that no equivalent clause in the primary licence with Mr and Mrs A was established. The authority was therefore entitled to bring these intangible assets onto the balance sheet and to determine taxable profit accordingly under article 38(2) CGI.
On the VAT invoice of 6 July 2006 issued to SARL ICP, the court held that the company had not demonstrated that the client had already accounted for French VAT through the mandatory reverse-charge mechanism, and the authority was entitled to assess VAT on that supply between two French entities.
On the 80% penalty, the court confirmed that the penalty under article 1728-1(c) CGI was lawfully applied because the activity in France was concealed and no excusable error had been established.
Finally, the court noted that the tax authority had granted an ex officio relief of 259,334 euros by a decision of 3 July 2018, following the opening of insolvency proceedings against the permanent establishment; the corresponding claims were therefore inadmissible before the court.
Outcome
The Administrative Court of Appeal of Nantes dismissed Coupole Finance's appeal in its entirety and confirmed the judgment of the Administrative Tribunal of Rennes of 7 May 2025. The company's claims for discharge and its application under article L. 761-1 of the Code de justice administrative for costs were both rejected. The ex officio relief of 259,334 euros granted by the authority on 3 July 2018 was noted, and the corresponding portion of the claims was declared inadmissible.
TP Method Highlighted
The judgment does not describe a specific transfer pricing methodology. The dispute concerned whether royalties under a master-concession contract of 18 December 2001 (with deferred payment subject to a 100,000-euro profit threshold) should have been recognised as accrued income in the taxable results of the permanent establishment, and whether the rights under the primary licence of 5 September 2000 (annual royalty of 27,440 euros, 49-year term) should have been capitalised as fixed intangible assets. No arm's length benchmarking analysis or transfer pricing method within the OECD framework is referenced in the judgment.
Major Issues / Areas of Contention
- Whether Coupole Finance had a permanent establishment in France constituting a 'siège de direction' under the Franco-Luxembourg double tax treaty of 1 April 1958 and an enterprise operated in France under article 209 CGI, given that the company was incorporated and registered in Luxembourg.
- Whether the place of supply of Coupole Finance's services was France for VAT purposes under article 259 CGI.
- Whether the ten-year extended limitation period for concealed activity under articles L. 169 and L. 176 LPF applied, in circumstances where the company was registered in Luxembourg but had not filed French declarations or registered its French activity.
- Whether registration in Luxembourg and compliance with Luxembourg fiscal obligations could constitute an excusable error justifying non-compliance with French declaratory obligations, including in the light of the restricted information-exchange clause in article 22 of the Franco-Luxembourg treaty.
- Whether article L. 169 LPF was compatible with EU law, including the freedom of establishment, the non-discrimination principle in article 21 of the Charter of Fundamental Rights, and article 54 TFEU.
- Whether Coupole Finance was required to recognise accrued royalty income from SARL Domespace International in its taxable results, notwithstanding the contractual deferral of payment until the subsidiary's results exceeded 100,000 euros.
- Whether the rights arising from the exclusive licence agreement of 5 September 2000 (49-year term, annual royalty of 27,440 euros) qualified as fixed intangible assets to be brought onto the balance sheet.
- Whether the VAT assessed on the service invoice of 6 July 2006 issued to SARL Intérieurs Cuir Prestiges (ICP) was well-founded, given the company's claim that the client had already accounted for VAT through the reverse-charge mechanism.
- Whether the 80% penalty for concealed activity under article 1728-1(c) CGI was lawfully applied.
- Whether the portion of claims corresponding to the ex officio relief of 259,334 euros granted on 3 July 2018 was admissible before the court.