Valueclick case (Cour administrative d’appel de Paris, march1 st 2018)

1. Valueclick case (Cour administrative d’appel de Paris, march1st 2018)

2. Valueclick Inc. : US company, leader in the online advertisement business (today « Conversant »). V Valueclick International Ltd : incorporated in Ireland Valueclick France (Valueclick Ireland uses the tradename and sells online advertisement products) License agreement (Valueclick France provides « marketing services » to clients) Services agreement V

3. Services agreement • prospection of potential clients • management services • back-office services • administrative and accounting services • human resources management • treasury management • management of the information technology According to the agreement : • VIL and VF are acting as independent parties • one party is not authorized to sign contracts in the name of the other party or to represent that party for the purpose of biding that party by an agreement. • VF’s remuneration : 8% cost-plus.

4. Tax audit and tax assessment • VIL’s activities in France limited to formally signing contracts with French clients and issuing invoices • Tasks perfomed by VF exceeded the scope of services listed in the agreement • According to the French taxe administration : • VIL has a PE in France as a result of activities performed by it’s French subsidiary • net profit for the advertisement business in France subject to corporate tax (IS) in France • VIL liable for French VAT due to the services provided in France through VF (« fixed establishement »)

5. Tax litigation • The tribunal administratif de Paris (first instance tribunal) rejected the taxpayer’s claim (march 7th 2017) • VIL appealed to the Cour administrative d’appel de Paris. • What did the Court rule on the question of : • the existence of a PE in France for the purpose of CT ? • the existence of a fixed base in France for VAT purpose ?

6. Did VIL have a PE in France ? 1 – Fixed place of business ? • VF did not perform services beyond those listed in the agreement : • VIL did not carry on a business through VF, separate from VF’s own activities. • VIL did not have a fixed place of business in France.

7. 2 –PE in France in the meaning of the terms of article 2 (9) (c) of France – Ireland DTT ? • The service agreements expressly excludes that VF operates as a dependent agent that habitually exercices an authority to conclude contracts in the name of VIL. • Despite the fact that : • VF negociated the terms of the contracts with tne French clients and was entitled to draw up certain clauses ; • the signature of the contracts by VIL was an mere formality (without any modification of the draft contract negociated by VF) • VF’s employees presented themselves with clients as employees of VIL • VF could not be considered as authorized to act for the account ans in the name of VIL  VIL did not have a PE in France.

8. Did VIL have a fixed base in France for VAT purpose ? • The place of supply of services is primarily the place where the supplier has established his business. Services cannot be deemed to be supplied at an establishment other than the main place of business unless that establishment has a minimum degree of stability derived from the permanent presence of both the human and technical resources necessary for the provision of the services on an independent basis (ECJ Case 168/84 Berkholz v Finanzamt Hamburg-Mitte-Altstadt july 4th 1985). • VF disposed in France of the human means to fulfill the agreement. But since VF’s employees were not authorized to sign advertisement contracts, the Valueclick group did not dispose in France of the necessary human means to operate on an autonomous basis • The necessary IT infrastructure was located in the US, Sweden and in the NL, but not in France  Valueclick could not technically operate autonomously in France.