what account to expense charge domain name costs fees
On December seven, 2016, the Conseil d'Etat(tenth Chamber), issued a judgment which confirms that the domain name is in fact an intangible nugget.
The upshot of the nomenclature of property equally expenses or assets
Intellectual property cannot be hands classified in a company's balance sheet. An option is bachelor for the possessor of the property: he can tape it as an expense in the company's profit and loss account, or every bit an intangible asset under the fixed avails of the company.
This is a major event because the corporate taxation base volition not be the same for companies depending on whether the holding is an expense or an intangible asset. Turn a profit will be diminished if the property happens to exist an expense for the business concern, compared to if it were an asset. Profit, naturally, is the result of the difference between revenue and expenses.
Requirements for intangible asset qualification
To be qualified an intangible asset, the property must meet three criteria:
– the property must be a regular source of turn a profit and thus generate revenues regularly
– the property must exist sufficiently durable; it must thus remain in the business for some fourth dimension;
– it must exist transferable. To authorize as an intangible asset, meeting these 3 requirements is mandatory.
If whatever of these weather condition is non met, the property will be requalified as an expense.
The eBay case, an illustration of the issue surrounding classification
According to the Conseil d'Etat, a domain name is an asset insofar as it meets these three requirements.
eBay was subject area to a taxation audit considering their domain proper noun did not appear on its balance sail. eBay was initially liable to pay boosted corporate income tax and additional contributions to this revenue enhancement for the years concluded Dec 31, 2003 and 2005, as well every bit corresponding penalties. The cyberspace Empire later filed a complaint with the Paris Administrative Court on March 20, 2012 in lodge to obtain relief from these tax surcharges.
eBay also brought action before the Administrative Courtroom of Montreuil (Tribunal Administratif de Montreuil) to obtain relief from the withholding revenue enhancement which the visitor had to pay too as corresponding penalties for the years concluded 2004 and 2005.
Following the dismissal of these applications by the Administrative Court of Paris (TA Paris du 1-two dated March 20, 2012, no. 1001793) and by the Administrative Court of Montreuil (TA Montreuil,dated February 9, 2012, no. 1000879), the Administrative Courtroom of Appeal dismissed both of the claimant'southward applications (CAA Paris, April 30, 2016, no. 12PA02246 and 12PA02678). The company and then brought the appeal before the Conseil d'Etat.
The Conseil d'Etat confirmed the calculation of the taxation administration also every bit the judgments of first instance and of appeal because that the domain name "ebay.fr" met the three requirements for qualification as intangible asset.
First of all, the domain name confers to its owner exclusive rights to use it, making information technology a significant source of revenue. In this particular case, the domain name "ebay.fr", registered with the AFNIC (Agence française pour le nommage Net en coopération) is duly owned by EBay France but the right to utilize had been granted to EBay International AG. In fact, eBay France had granted a costless license to its parent company. The taxation authorities nevertheless considered that eBay French republic indirectly transferred its profits to its parent visitor past granting this correct of employ without levying fees. This was, therefore, a regular source of revenue for eBay French republic which it failed to report, every bit a consequence of analysing the situation as a mere necessity for administrative approval.
Furthermore, this exclusive correct of use must be renewed each yr with the AFNIC (in accordance with the provisions of the AFNIC naming policy), against payment of applicable fees necessary to conduct out this formality. As a consequence, the asset'south lifespan in the visitor is sufficient to satisfy the requirement of sustainability: as long every bit the domain proper noun is renewed, the sectional right in favour of the possessor shall remain in force.
Finally, the renunciation to renew the domain proper name "ebay.fr" by iBazar, by style of compensation by the Ebay grouping, enabled EBay France to register this domain name immediately. Equally a result, this action was perceived by the administrative courts equally a rights transfer from iBazar to eBay to use this domain proper noun. This renunciation by a visitor to renew the domain proper name and then that another may benefit from information technology, against payment of a fee, could be said to be a transfer of ownership and therefore an assignment.
In this instance, a domain name that did not appear in the balance sheet was considered fraudulent and gave tax government the opportunity to recover eBay France. In the case, eBay France was this domain name's registrant but its utilise was managed by eBay International AG. The fact that it meets all the 3 requirements for qualification every bit an intangible asset should have placed the domain name in eBay France's balance sheet.
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