On June 25, 2026, the Toulouse Administrative Court of Appeals (CAA), in the case of Sté Ceremed Swiss (No. 24TL01882), confirmed the existence of a permanent establishment in France for a Swiss company and, in doing so, upheld the collection proceedings initiated by the tax authorities.
For groups with operations in both France and Switzerland, this decision clearly illustrates the vigilance exercised by the tax authorities whenever a foreign company effectively carries out management activities on French territory.
What is a permanent establishment?
In international tax law, a permanent establishment refers to a fixed place of business through which a company conducts all or part of its business. In practice, a company domiciled abroad may be taxed in France if it has sufficient physical or human resources there to carry out an independent business activity. Courts assess this situation based on a set of indicators: the location where management decisions are made, the existence of a representative authorized to bind the company, the location of the accounting records, and whether or not the company actually has a foreign headquarters.
The facts: headquartered in Switzerland, managed in France
In this case, the company was legally domiciled in Switzerland. However, the tax authorities demonstrated—based on an inspection and seizure conducted pursuant to Article L. 16 B of the Book of Tax Procedures, that all accounting and business documents were located at the French residence of the company’s representative, who spent approximately 75% of his time there. The articles of incorporation themselves referred to management from France. The court concluded that the Swiss headquarters was merely a registered address with no actual business activity and affirmed the existence of a permanent establishment in France; the executive’s temporary residence in Morocco did not alter this finding.
Two procedural points to keep in mind
- Double taxation was claimed, but no mutual agreement procedure was ever initiated. The company contested double taxation with Switzerland, but it had not taken any steps with the competent authorities under Article 27 of the Franco-Swiss tax treaty. Because it had not invoked this treaty provision, the argument was rejected. The lesson is clear: the mutual agreement procedure is a safeguard, but it requires formal action by the taxpayer within specific time limits.
- An improper notice does not invalidate the assessment. The tax assessment notice had been served at the permanent establishment’s French address, even though the company had designated its Swiss counsel as its agent for service. The court ruled that this irregularity, while it may have an impact on the statute of limitations or the enforceability of the tax, does not affect either the validity of the tax assessment procedure or the validity of the tax decision itself. This distinction, established by Article L. 281 of the French Book of Tax Procedures, highlights the difference between challenging the assessment and challenging the collection.
What This Means for Franco-Swiss Organizations
Three key points to note emerge from this decision:
- Aligning economic reality with legal domicile: Having a registered office abroad is not sufficient if the actual management (i.e., staff, signing of contracts, record-keeping) takes place in France.
- Document the allocation of functions: service agreements, workflow tracking, and justification for the location of executives—conclusive documentation is the best protection against reclassification.
- Immediately initiate the procedures set forth in the treaty in cases of double taxation: the Franco-Swiss treaty provides a means of resolution, but it must be actively and promptly invoked to remain effective.
The growth of remote work and cross-border structures has made these arrangements both more common and subject to closer scrutiny by the authorities. An activity presented as “Swiss” may, in practice, be reclassified as a French activity if that is where operational management is actually located.
Polaris Avocats assists executives, companies, and international groups in structuring their operations between France and Switzerland, both through tax advisory services and in the context of litigation. Our teams in Paris and Zurich provide coordinated support on these cross-border issues, ranging from anticipating the risk of a permanent establishment to managing disputes with tax authorities.
If you have any questions about your situation, please contact our team.