The Pharmatique Industrie case shows the high comparability standard required by the courts of France.
The tax authorities used five similar license agreements in the same pharmaceutical sector, as comparables in a transfer pricing dispute regarding payments of royalties for the use of knowhow and trademarks.
Judgement of the Court
The court ruled in favour of the tax authorities.
Excerpt
“.., is not confirmed by a reading of the contracts attached to the file not only the granting of trademarks for the specialities in question, but also, as in the grants put forward by way of comparison by the administration, of manufacturing processes or know-how, the service must be regarded as providing proof of the exaggerated nature and therefore non-deductible nature of the said royalties in the above-mentioned proportion; that in any case, and without it being necessary to examine whether the royalties are deductible in principle, it follows that the company PHARMATIQUE INDUSTRIE is not entitled to maintain that it is wrongly that, by the judgement in question, which is sufficiently reasoned, the Administrative Court of Paris rejected the request of the company Laboratoires Schoum for discharge of the supplements to corporation tax…”
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