When I was an in-house counsel, I saw the same scenario play out over and over again:
a CFO convinced an intragroup indemnity would be treated as an immediately deductible expense,
then a tax audit arrived…
and suddenly the administration requalified it as an intangible asset to be capitalized.
The consequence? Cash-flow shock, accounting restatements, and a long litigation battle.
A recent decision from the French Conseil d’État (26 Sept. 2025, n° 494985) has now clarified the only conditions under which a restructuring indemnity must be capitalized.
A ruling every CEO, CFO, and GC should know whatever the industry.
🔍 The facts: a €8M restructuring indemnity inside a European group
In this case:
- a French company paid €8 million to an Italian sister company;
- it took over spare-parts procurement and international commercial operations;
- the indemnity compensated the Italian entity for lost future profits, valued using a DCF method.
The tax authorities requalified the payment as the price of an intangible asset.
⚖️ The Conseil d’État’s position
👉 Compensating someone’s “loss of a profit source”
does not automatically mean the payer acquires an asset.
For an indemnity to be capitalized, two cumulative conditions must be met:
1️ The asset must be identifiable, distinct, and separable : (consistent with the French Accounting Standards Authority – ANC Regulation 2014-03)
2️ The asset must have positive future economic value for the payer : meaning a clearly identifiable and durable economic advantage.
In this case, nothing was transferred that met these criteria:
no customer list,
no license,
no patent,
no IP rights,
no separable intangible asset at all.
➡️ Therefore: no intangible asset, unless proven otherwise.
The case is now remanded to the Paris Administrative Court of Appeal for concrete verification.
📌 What leaders must take away
Here are the most frequent intragroup restructuring mistakes all corrected by this ruling:
❌ Confusing “profit improvement” with “acquiring an asset” : Higher margins ≠ intangible asset.
❌ Assuming a DCF valuation creates an asset : A DCF models a loss of profit, not a property right.
❌ Underestimating identifiability : If nothing identifiable is transferred → no capitalization.
❌ Forgetting who bears the burden of proof : When requalifying a charge, it is the tax authority that must prove the existence of an asset.
🧩 Why the legal department is absolutely central in these operations
In my experience, the safest restructurings all had one thing in common:
👉 Legal was involved from the strategic design stage, not just at contract-drafting time.
Because:
📋 1. Legal documents what is and isn’t transferred
Precise legal qualification is essential.
If no asset is transferred, it must be explicitly stated and justified.
⚖️ 2. Legal ensures accounting–tax–legal alignment
A defensible position requires perfect coherence across:
legal • finance • tax • operational teams.
🎯 3. Legal anticipates requalification risk
Risk assessments, legal memoranda, and governance-approved analyses avoid surprises.
🧾 4. Legal builds the evidentiary file
During a tax audit, documentation quality determines the outcome.
🎯 Conclusion
Intragroup restructurings are never purely financial operations.
They are legal operations first, and the tax outcome directly depends on the legal structuring.
One missing sentence, one poorly defined transfer perimeter, and millions can evaporate.
