Whenadministration the reserves set aside for legal fees

A company underwent a tax audit, following whichadministration that the provisions the company had deducted to cover legal and expert fees related to construction disputes were not deductible.administration that these provisions had not been estimated with sufficient accuracy.

The tax assessment was challenged all the way up to the Administrative Court of Appeals.

She will then point out that:

• An appraisal was conducted at the end of the 2015 fiscal year, during which the provisions were deducted.

• Following this inspection, new defects were identified.

• A new assessment was underway.

• The dispute involved 31 parties, with damages amounting to several million euros.

• The insurer had already prepaid more than one million euros for the work.

• Between 2013 and 2015, the company filed four subpoenas, a motion for compulsory appearance, and an appeal regarding the appointment of the second expert and the definition of his or her scope of work.

• By the end of 2015, 31 briefs and submissions had been submitted to the expert.

The Court will then examine the method used to determine the reserve, which involved the company calculating the annual average of its expenses—particularly legal fees—since 2009. The resulting amount was multiplied by the number of years the litigation was expected to last.

The Court will then rule that the provision was indeed determined with sufficient accuracy.

She will also point out that this was indeed the case by presenting a detailed statement from the company’s cost accounting records, which showed expert witness and legal fees totaling approximately 340,000 euros from 2009 to 2015.

The tax assessment is therefore rescinded.

CAA Paris, April 3, 2026, No. 25PA02167

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