Sale Expenses and Deductible VAT: Contract Provisions Prove That These Expenses Were Not Included in the Sale Price

A holding company sold some of its subsidiaries to a U.S. group and was subsequently subject to a tax audit. During the audit, the French Tax Authority (administration ) questioned the deductibility of the VAT charged on the fees paid to the advisors involved in the transaction.

The reassessment was challenged all the way to the Administrative Court of Appeals.

The authority will then reiterate the principle that VAT on consulting expenses is not deductible, as well as the exception to this principle: if the selling company demonstrates that the expenses were not included in the sale price, the VAT is deductible because the expenses are part of the company’s overhead costs. This rule also applies to expenses paid to a consultant who assisted the company in preparing for the sale and during the transaction “provided that these two categories of services did not give rise to separate compensation.”

The court will then find that the purchase offer stated that "all costs and expenses incurred by the buyer in connection with the acquisition shall be borne by the buyer, and all costs and expenses incurred by the sellers and the company in connection with the acquisition, including broker or intermediary fees, shall be borne by the sellers."

She then notes that the meaning of these statements is reflected in both the original sales agreement and the amended sales agreement, and that theadministration does not dispute these provisions in the various contracts.

She concludes that the expenses do indeed constitute general and administrative expenses for the transferring company and that the VAT was indeed deductible.

The tax assessment is therefore rescinded.

CAA Marseille, Sept. 17, 2026, No. 25MA00041

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