The Paris Administrative Court of Appeal confirmed on 2 February 1995, the recent developments of the cancellation of debts tax treatment. This decision confirms the deductibility of financial cancellation of debts to foreign subsidiaries if the French parent has an interest in such an operation. It also confirms that such deductibility does not contradict the French territoriality principle. In doing so, law places less emphasis on the traditional distinction between financial cancellation of debt (in order to avoid the assumption by the parent company of the subsidiary's liabilities further to its bankruptcy) and commercial cancellation of debt (in order to maintain the parent company's commercial outlet). Such a distinction remains, however, if the subsidiaries have a positive financial situation. In such a case, the cancellation of debt is not deductible, the parent company having consideration in the increased value of its participation.

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