France Administrative Court of Montreuil Clarifies Tax Deductibility of Judicial Penalty Payments, Competition Law Fines

The French Administrative Court of Montreuil March 30 issued Jurisprudence Letter No. 23, clarifying the tax deductibility of judicial penalty payments and competition law fines for corporate income tax purposes, as discussed in Decision No. 2304897. The taxpayer, the parent company of a tax-consolidated group, deducted a court-ordered penalty in financial year 2011 and a competition law fine covered by a group guarantee in 2012. The tax authorities reduced the group’s carried-forward tax losses, finding the amounts non-deductible. Upon review, the Administrative Court found that: 1) judicial penalty payments are non-deductible because they are coercive in nature and intended to ...