Transfer pricing: a double setback foradministration

Last Tuesday, the Nantes Administrative Court of Appeal overturned two transfer pricing assessments.

In the first case,administration criticized a company for failing to charge back research and development costs associated with the acquisition of intangible assets that were subsequently transferred to a group company.

The Court will note, however, that the agreement for the transfer of intangible rights provided for compensation for non-reimbursed expenses through a reduction in the royalty rate associated with the exploitation of rights belonging to the group company to which the assets were transferred.

The royalty rate charged at the time was justified by a study of the rates charged by independent companies.

The Court notes that theadministration criticismadministration this study, without providing any comparable alternatives, does not allowadministration that there was a transfer of profits.

In the second case, the Court ruled thatadministration justified in concluding that the method used by the company did not demonstrate that the prices charged were at arm’s length.

However, the Court found that the net margin method applied byadministration justify the adjustment. It ruled that "the difference noted byadministration the prices charged by the appellant company to its related companies and the prices charged by the companies in the selected panel is justified by the risks that the company […] is required to assume and which have affected its profitability."

Case No. 1: Nantes Administrative Court of Appeal, Nov. 25, 2025, No. 25NT00264

Case No. 2: Nantes Administrative Court of Appeal, Nov. 25, 2025, No. 25NT00504

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