Tag: Piaggio

France vs Piaggio, July 2020, Administrative Court of Appeal, Case No. 19VE03376-19VE03377

Following a restructuring of the Italien Piaggio group, SAS Piaggio France by a contract dated January 2 2007, was changed from an exclusive distributor of vehicles of the “Piaggio” brand in France to a commercial agent for its Italian parent company. The tax authorities held that this change resulted in a transfer without payment for the customers and applied the provisions of article 57 of the general tax code (the arm’s length principle). A tax assessment was issued whereby the taxable income of SAS Piaggio France was added a profit of 7.969.529 euros on the grounds that the change in the contractual relations between the parties had resultet in a transfer of customers for which an independent party would have been paid. In a judgement of October 2019, Conseil dÉtat, helt in favor of the tax authorities and added an additional profit of 7.969.529 to the taxable income of Piaggio France for the transfer of customers to the Italian parent company. Since the French agent had received no payment for the transfer, an assessment of withholding tax (dividend – hidden distribution of profit) was issued in accordance with the French-Italien Double tax treaty. An appeal filed by Piaggio on this additional issue. Piaggio claimed, that only risk but no intangibles had been transferred. Hence there was no basis for withholding taxes on hidden distribution of profits. Decision of the Administrative Court of Appeal. The Court held in favor of the tax authorities and dismissed the appeal. “…It results from the very terms of the contract produced by the administration on appeal, that SAS PIAGGIO FRANCE has become, as of January 2007, the commercial agent of its parent company, the latter’s agent and, as such, without its own clientele and without the right to hold the business. The applicant company claims to have continued the same activity in another form, by continuing to develop and commercially animate the French dealer network in exactly the same way as it did before the change in status, while acknowledging that the legal changes of change in status led to a transfer of risks, these factors do not prove that the brand’s dealer clientele in France, which it now lacks, would not have been transferred to its parent company, which succeeded it in the distribution of the brand’s products in France and took over all the risks associated with this operation and the brand’s development. Moreover, it follows from the very terms of the agency agreement that, contrary to what it maintains, the applicant company, which must obtain the agreement of its parent company in order to enter into a new distribution contract, does not directly choose and manage the scope of the approved dealers. Moreover, if it claims not to have transmitted its know-how, it does not establish it. Finally, even supposing that the applicant company’s operating income had not deteriorated, that the number of its employees would have been maintained, and that no other distributor would have been compensated, these circumstances are not such as to establish the absence of transfer of its own clientele to its parent company. It follows from this, and while the change in status in 2007 did not result in any compensation for SAS PIAGGIO FRANCE, the management was entitled to consider that by transferring its clientele and know-how to it, the latter had granted an advantage to the Italian company Piaggio et C Spa. In view of the foregoing and since SAS Piaggio France is indirectly owned by the Italian company Piaggio et C Spa, it is presumed, contrary to what it claims, to have made a profit transfer, within the meaning of the aforementioned provisions of Article 57 of the General Tax Code. It was thus for it to prove, which it did not do, that that transfer involved, for it, sufficient consideration and did not depart from normal commercial management. It is therefore rightly, in application of the aforementioned provisions and stipulations, that the administration has charged the withholding tax, the additional corporate income tax contribution and the corresponding social contribution on corporate income tax.” Click here for English translation Click here for other translation CAA de VERSAILLFrance vs Piaggio ES, 1ère chambre, 06_07_2020, 19VE03376-19VE03377, Inédit au recueil Lebon ...

France vs. Piaggio, October 2019, Conseil dÉtat, Case No. 418817

Following a restructuring of the Italien Piaggio group, SAS Piaggio France by a contract dated January 2 2007, was changed from an exclusive distributor of vehicles of the “Piaggio” brand in France to a commercial agent for its Italian parent company. The tax authorities held that this change had resulted in a transfer without payment for the customers and applied the provisions of article 57 of the general tax code (the arm’s length principle). A tax assessment was issued whereby the taxable income of SAS Piaggio France was added a profit of 7.969.529 euros on the grounds that the change in the contractual relations between the parties had resultet in a transfer of customers for which an independent party would have been paid. The Judgement of the Court The court helt in favor of the tax authorities and added an additional profit of 7.969.529 to the taxable income of the SaS Piaggio France for the transfer of customers to the Italian parent company. SAS Piaggio France had until 2007 an exclusive distribution activity in Franch of vehicles of the brand “Piaggio”, which were bought, imported and then resold in its own name to French dealers. For this activity, SAS Piaggio France had developed its own strategy for the French market. It has established and managed a vast network of dealers for which it determined the volumes and models to buy as well as its own commercial policy in terms of pricing and after-sales service. It also and assumed the risks of managing its stock of piaggio products of which it was the owner as well as the commercial risks resulting from possible unpaid or unsold goods. Under these conditions, SAS Piaggio France must be regarded as having created its own customer base – regardless of the strong reputation of the “Piaggio” brand in France – by the network of dealers and the corresponding business. In holding that the transformation of SAS Piaggio France from an exclusive distributor into a simple commercial agent for Piaggio and C SpA did not entail any transfer of customers that should be compensated, the judgement from the court administrative appeal was inexact in the legal characterization of the facts. Click here for translation Conseil_d_État_10ème_-_9ème_chambres_réunies_04_10_2019_418817_Inédit_au_recueil_Lebon ...