Failure to bill a Brazilian subsidiary and improper management practice

A holding company that managed the group’s intellectual property rights and oversaw the development of new technologies also held stakes in a Brazilian company.

The holding company was subject to a tax audit, following whichadministration that the failure to invoice the Brazilian subsidiary for royalties as provided for in the licensing agreements constituted an irregular business practice.

The dispute was taken all the way to the Administrative Court of Appeals.

The holding company initially believed that registering the license agreements with the Brazilian INPI was not possible because Brazilian regulations deemed claims against the Brazilian subsidiary to be uncertain in principle and indefinite in amount.

The Administrative Court of Appeal will, however, note that, based on the facts, the holding company and its subsidiary had waived the registration requirement set forth in the license agreements.

It further considers that the Brazilian company had properly exploited the intellectual property rights and that there was no evidence that the Brazilian INPI had refused to register the license agreements or had blocked the transfer of funds corresponding to the royalties.

The Court has thus upheld the tax assessment against the holding company.

CAA Nantes, Feb. 17, 2026, No. 25NT01349

This monitoring service is provided by Mispelon Avocat, a law firm specializing in tax audits and tax litigation. You can stay updated by subscribing to the newsletter via this link.