Can a tax adjustment to a provision be offset by the retroactive rescission of a debt waiver due to a defect in consent?

Following a tax audit,administration a company of their intention to deny the deduction of a provision of 1.2 million euros.

The company did not contest this adjustment but argued that a debt waiver by the manager in the amount of 1.4 million euros should be rescinded and should offset the adjustment.

Following the tax audit of the company, the manager sent a registered letter to the company stating that he had made an error regarding the basis for the gift in accordance with Article 1135 of the Civil Code and that the debt waiver was therefore retroactively void.

The manager stated that he would not have written off the debt had he known that it would result in a tax assessment against the company.

The company therefore requested that the adjustment related to the provision be offset by the reversal of the debt forgiveness.

The Administrative Court of Appeal will, however, rule that the debt waiver "served an accounting purpose rather than a tax purpose" and that "the argument now raised by the [company]—that the manager would not have agreed to such a debt waiver had he known it would result in a tax assessment […]for the [company] cannot therefore clearly constitute an error regarding the basis of a gift within the meaning of the aforementioned provisions of the second paragraph of Article 1135 of the Civil Code.”

It therefore confirms the recovery.

CAA Nancy, Dec. 9, 2025, No. 25NT00002

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