The commercial nature of a debt waiver implies commercial opportunities

The parent company of a group wrote off several debts owed by group companies during the fiscal years ended in 2015 and 2017. It determined that these write-offs were of a commercial nature and therefore deducted them.

Following a tax audit, the taxadministration questioned the commercial nature of these transactions and issued a tax assessment to the company.

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

The court then noted that, contrary to the company’s assertion, the debt write-offs could not have been intended to protect its reputation among German boiler manufacturers or to safeguard its market access in Germany and Europe.

The Court notes, in fact, that the products manufactured by the company did notmeet “German standards for the construction of chimney flues” and that the German company to which the debt waiver had been granted sourced its supplies almost exclusively from Poland.

It also rejects the company’s arguments that its presence in Germany enabled it to expand into Belgium. The Court notes that the company did not provide any objective evidence regarding its prospects for expansion and that, as a result, such prospects were purely hypothetical.

Finally, the Court will also reject the arguments put forward by the company to justify the deductibility of debt forgiveness granted to a Turkish subsidiary of the group. It justifies this rejection on grounds similar to those mentioned above.

The tax assessment is therefore confirmed.

CAA Bordeaux, Sept. 4, 2026, No. 24BX00508

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