In a recently published decision of 11 March 2005 (SA Guerlain, No. 01PA01206), the Court of Appeals of Paris held that the debt waivers granted by a French parent company to two branches of its 99.9%-owned Hong Kong subsidiary constituted a transfer of profits under Art. 57 of the French Tax Code (Code Général des Impôts (CGI)). The details of the decision are summarized below. (a) Background. Under Art. 57 of the French Tax Code (CGI), the tax administration may add back to the taxable income of French companies, or branches of foreign companies, profits indirectly transferred to related companies...