France’s Highest Court Upholds Tax Adjustments in Howmet SAS Case

Dated 23 July 2024

The Conseil d’État dismissed Howmet SAS’s appeal against tax adjustments imposed by French authorities following audits for 2010–2012. The case concerned a financial contribution to a Belgian group company and management fees paid by Howmet’s subsidiary, AHF, to the group’s American parent. The tax authorities reclassified these transactions as an abuse of rights, arguing they were designed solely to reduce taxable income through interest deductions.

Initially, the Montreuil Administrative Court ruled in Howmet’s favor, but the Paris Administrative Court of Appeal reversed this decision, upholding the tax assessments. On appeal, the Conseil d’État confirmed the lower court’s ruling, finding that the financing structure—using capital contributions instead of loans—was artificially arranged to avoid taxation. It agreed with the tax authorities’ decision to reinstate the equivalent interest in Howmet’s taxable profits.

The Court also rejected Howmet’s claim that the interest rates on the loans were excessive, emphasizing that the arrangement’s artificial nature rendered this argument irrelevant. Additionally, it dismissed the assertion that unused cash would have been distributed to shareholders instead of increasing capital. 

The ruling reaffirms the application of the abuse of rights doctrine in tax matters.

Full Link to English Translation: https://tpcases.com/france-vs-howmet-sas-july-2024-conseil-detat-case-no-474666-eclifrcechr2024474666-20240723/