France: The fiscal status of foreign image rights companies

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BY ADRIEN KHAZNADJI[1]

It has been common practice for decades for high-profile artists, models and athletes to structure their endorsement activities through specially incorporated vehicles – typically referred to as image rights companies (“IRCs”) – rather than entering into agreements in their individual capacity. The rationale is straightforward: by interposing a company between the talent and the business partner, the individual takes advantage of the limited liability and asset protection provided by the corporate veil and seeks to defer or reduce the tax burden attached to what are often substantial sums. The legal form of these IRCs can differ based on the local practices and regulations of the jurisdiction of incorporation.

A French fashion house retaining a globally recognised figure for an ad campaign, a Premier League club licensing a star player’s image, or a luxury brand signing an international ambassador – in each of these scenarios, the commercial reality is that the contract sits not with the individual, but with a legal vehicle incorporated abroad, frequently in a low-tax jurisdiction or simply in the talent’s country of residence.

This structuring raises a deceptively simple question: where the remuneration flows to the company rather than to the individual, can the latter nonetheless be taxed in the source country on those sums? The answer, as French tax law currently stands, turns on a careful – and at times highly technical – articulation between domestic source rules, anti-avoidance provisions, and bilateral tax treaty obligations. The decision handed down by the Paris Administrative Court of Appeal on 12 March 2026 brings this tension into sharp focus and does so in a context – the world of fashion and luxury endorsement – that maps directly onto the legal and fiscal challenges faced by professional athletes and their advisers.

A British actress, named Ms B in the court decision, residing in the United Kingdom, was remunerated through two UK image rights companies (“IRCs”) – KCK Boo Ltd and Ponder Rights Ltd – via Chanel SAS, a French entity of the global luxury brand. The aggregate consideration paid to those vehicles amounted to approximately € 3.2 million for the 2015 tax year alone. The structural significance of the case lies in the interposition of an image rights company between the talent and her French principal. The procedural history should also be noted: Administrative Tribunal of Montreuil, 29 February 2024, followed by the Paris Administrative Court of Appeal (Cour administrative d’appel, “CAA”), 12 March 2026.

The decision concerns a famous actress who, at the height of her career, served as the face of one of France’s most iconic luxury houses – a set of facts that could, almost without alteration, may also apply to the commercial arrangements of a top-flight professional athlete or performing artist. The central question it poses is the following: to what extent does French tax law, both domestic and treaty-based, permit the taxation – in the hands of the non-resident talent personally – of income received by an interposed company under his or her control? The CAA answer, delivered on 12 March 2026, is unambiguous: where the French tax authorities select the wrong legal instrument, neither the domestic source rules nor the treaty framework can rescue an otherwise flawed assessment. The Court’s reasoning first exposes the limits of the basis actually relied upon (I), before revealing, in negative relief, the instrument that ought to have been deployed – one which the legislature has since moved to solidify (II).

International models and French tax law: key takeaways from the case

The core of the dispute lies in the French Tax Authorities’ attempt to tax income that was not paid directly to the individual, but rather to intermediary corporate structures. In its ruling, the CAA clarifies the strict boundaries of domestic tax law, focusing on the requirement of a direct beneficiary and the hierarchy of norms.

Taxation of a non-resident tax model in France – principles

The activity of modelling occupies a distinctive place in French employment law. Under art. L. 7123-2 of the French Labour Code, any individual charged with presenting goods, services or advertising messages to the public – whether directly or through the reproduction of their image on any visual or audiovisual medium – is deemed to exercise the activity of a model. Crucially, any contract by which a person secures the services of a model in exchange for remuneration is presumed, by operation of law, to constitute a contract of employment. This statutory presumption is not merely a matter of private ordering: it reflects a public policy choice (ordre public) aimed at protecting the “weaker party”, and its reach extends to models whose primary activity is conducted abroad but who are engaged, even occasionally, to perform services for the benefit of a French undertaking. Equally significant is the requirement that the engagement of models be conducted exclusively through licensed modelling agencies – brands and corporate groups may not contract directly with models. This regulatory framework applies irrespective of the model’s country of residence, and any contractual clause that purports to waive or circumvent this rule of public policy shall be void and unenforceable. Naturally, this rule is of particular significance given France’s prominence in the fashion and luxury sectors. However, it also extends to athletes entering into endorsement deals with sports equipment brands that require them to wear specific apparel or footwear.[2]

The fiscal consequences of this qualification follow naturally. Where a non-resident model performs services on French territory, the remuneration received constitutes French-source income within the meaning of art. 164 B(I)(b) of the French Tax Code (Code général des impôts) (“CGI”) and, accordingly, is subject to French income tax. Taxation then operates in two stages: the primary collection mechanism is the withholding tax provided for under art. 182 A of the French tax code, which imposes a levy on sums paid by a French debtor to a non-resident in respect of, among other things, remuneration for services rendered in France. Then, where the non-resident’s aggregate French-source income exceeds a prescribed threshold – set at € 50,112 for salaries received in 2026 – by an obligation to file an income tax return, against which the withholding already suffered is credited. Below that threshold, the withholding tax is fully discharging. The framework is, in short, relatively straightforward and generates little debate in its standard application – as illustrated by the Paris Administrative Court of Appeal decision of 15 June 2022, which applied these principles without difficulty to a US actress and model performing services and licensing the right to use her name and likeness to the French luxury group Givenchy.

What disrupted this otherwise settled framework in the present case was not the nature of the activity, but the identity of the contractual counterparty. Chanel SAS did not enter into a labor contract with Ms B personally. It contracted with two British companies – KCK Boo Ltd and Ponder Rights Ltd – which invoiced for the services and collected the consideration. By definition, income received by a corporate entity cannot constitute salary in the hands of the individual behind it: a company does not earn wages. The moment the IRC steps into the contractual chain, the domestic taxation framework built around the presumption of employment dissolves, and a far more complex set of questions arises as to which legal instrument, if any, can reconstitute the tax administration’s entitlement to tax.

The inadequacy of the legal basis relied upon by the French tax authorities

Faced with the impossibility of taxing the actress on the basis of a deemed employment relationship – the contractual counterparty being a corporate entity rather than an individual – the French tax authorities turned to a different provision of domestic law. Art. 164 B(II)(c) of the CGI deems to constitute French-source income any sums paid as consideration for services of any kind rendered or used in France, provided the paying party is established in French territory. Since modelling has consistently been treated as a service for the purposes of this provision, and since Chanel SAS, the paying party, was unquestionably established in France, the legal basis appeared, at first glance, solid.

A firm reminder as to the scope of the “salary” qualification: the direct beneficiary requirement

The Paris Administrative Court of Appeal swiftly dispelled that impression. In terms that admit of no ambiguity, the Court held that art. 164 B cannot justify subjecting an individual to income tax on income of which she is not the direct beneficiary (para. 6). The provision taxes sums paid in consideration for services – but it taxes them in the hands of the recipient. Where those sums flow not to the individual but to a corporate vehicle, the provision simply has no reach. The interposition of an IRC does not merely complicate the analysis; it severs the very nexus upon which the charge depends.

This conclusion gains further force when read against the background of recent case law. The tribunal, in its judgment of 29 February 2024, had correctly characterised Ms B’s services as modelling activities – a classification consistent with the Schiffer case (CAA Paris, 30 June 2011), under which the physical performance and the associated image rights license are treated as legally inseparable. Yet the Tribunal failed to draw the necessary legal conclusions from the existence of the corporate structure: having identified the right category of income, it overlooked the question of who had actually received it. The CAA decision on appeal rectifies that omission and, in doing so, draws a sharp distinction between the characterisation of income and the identification of its recipient – two facts which, while related, are legally distinct.

The contrast with the Administrative Court of Appeal of Paris decision of 15 June 2022 (Ms C., no. 21PA03537) is instructive in this regard. In that case, an American actress engaged as the face of a French fragrance brand was taxed under art. 164 B on the remuneration she received – and the court upheld the assessment without difficulty. The decisive difference, however, was that the sums in question had been paid directly to the taxpayer. There was no interposed company, no IRC, no corporate buffer between the French payer and the individual recipient. Taken together, the two decisions establish a clear principle: it is the existence of a corporate entity, rather than the nature or classification of the underlying income, that determines the outcome.

The taxpayer’s arrangements comprised two wholly-owned British entities. KCK Boo Ltd held the services agreement and invoiced Chanel SAS for the physical modelling services. Ponder Rights Ltd held the name and image rights agreement and invoiced for the authorisation to use Ms B’s name and likeness. The Court of Appeal held that both companies declared the income received, paid United Kingdom corporate tax, and subsequently distributed their after-tax profits to Ms B as dividends – themselves subject to UK income tax. The French tax authorities did not challenge the economic substance of these entities, their arm’s length character, or the genuineness of the arrangements. By declining to do so, the Court effectively validated the structure as a matter of French administrative law.

That validation is, however, only one side of the coin. French domestic law does contain a specific anti-avoidance provision – art. 155 A of the CGI – which enables the French tax authorities to tax an individual by looking through a controlled intermediate company and treating the income received by that vehicle as directly attributable to the individual who rendered the underlying services. The fact that the French tax authorities chose not to invoke this mechanism – despite the conditions for its application appearing, on the face of it, to be met – constitutes the most significant silence in the ruling, and one to which we shall return.

The Franco-British tax convention: a rule allocating taxing rights, not a statutory basis

Unable to establish a sufficient domestic legal basis, the tax authorities sought to draw support from art. 17 of the France-United Kingdom Double Tax Convention of 19 June 2008. The Court’s response was a restatement of one of the most fundamental principles of international tax law: a bilateral tax treaty does not, of itself, create a right to tax. Its function is to allocate existing taxing rights between two contracting states – to determine which of them may impose a charge that domestic law has already established. Where no such charge exists under domestic law, the treaty has nothing to operate upon.

The reminder of this principle, long settled in French administrative jurisprudence since the Schneider Electric decision of the Conseil d’État, has a perfume of déjà vu. The Convention’s art. 17 may well confer on France the right to tax income derived by an artiste or sportsman from certain activities exercised on French soil, even where that income is attributed to a third party rather than to the individual directly. But it cannot conjure a taxable event out of thin air in the absence of domestic law. Since art. 164 B failed as a domestic charging provision – as it plays only a pure definitional role with the French tax code – art. 17 of the Convention had no legal basis upon which to act. The treaty could not rescue an assessment that domestic law was incapable of supporting.

If both the convention and art. 164 B are inoperative, can we think of a provision of domestic law capable of founding the charge to tax?

Art. 155 A of the CGI: the omitted ground, subsequently reformed

The pre-eminent anti-IRC instrument

Art. 155 A of the CGI was introduced by the Finance Act 1973 to counter the “rent a star company” schemes: a musician establishes a foreign company to collect his or her income derived from live performances, whilst drawing only modest personal remuneration from that entity. The mechanism enables the French tax authorities to “look through” the interposed company and assess the sums directly in the hands of the actual provider of services (who is generally the sole of the company), provided one of three alternative conditions is satisfied: control of the foreign company, absence of a substantive commercial activity of its own, or incorporation in a low-tax jurisdiction. This provision also applies, in the version currently in force, also to non-resident taxpayer, as long as the income received by the company are seen as consideration for services rendered in France.

In the present case, the conditions appeared to be met: Ms B held 100% of the shares in both UK companies, whose activity was limited to invoicing her personal services without any material independent contribution. The French tax authorities accordingly had the opportunity to attempt applying art. 155 A – and chose not to use them (or did not think of them).

A separate analysis should have been conducted, first for KCK Boo Ltd (which invoiced the physical modelling services) and subsequently for Ponder Rights Ltd (the name and fame agreement). The latter received amounts in consideration for the authorization to use Ms B’s name and likeness – sums which essentially remunerate a license of some sort. It is likely that the analysis carried out and conclusions reached would have been different. The Conseil d’État held, in Vuarnet (CE, 8 June 2020, No. 418962) and again in CE, 5 November 2021 (No. 433367), that sums paid in consideration of the grant of an exploitation right do not constitute consideration for services rendered within the meaning of then art. 155 A(I) provisions.

However, those decisions post-date the facts discussed here (2013–2015), and the situation of an active model differs from that of a retired ski champion: notoriety may be treated as inseparable from the ongoing activity (CE, 4 December 2013, No. 348136, Edmilson). The French tax authorities might have advanced this argument – whether successfully or not, the question remains open on the facts of this case.

It should also be noted that the Conseil d’État upheld the constitutional validity of the provision, subject to the avoidance of double taxation – a safeguard satisfied in the present case given that the UK companies had already paid UK corporation tax on the relevant profits.

A legal loophole on IP revenues – closed by the Parliament

A reform directly inspired by the loophole revealed by this litigation

Art. 10 of the Finance Act 2024 (Law No. 2023-1322 of 29 December 2023) has extended the scope of art. 155 A to amounts received in consideration of the commercial exploitation of rights attaching to the image, name or voice of one or more individuals, as well as to copyright, neighbouring rights, and industrial or commercial intellectual property rights. These provisions apply to income received on or after 1 January 2024.

The reform directly addresses the Vuarnet case and the 2021 Conseil d’État decision: where the Court had held that image and trademark royalties fell outside the scope of art. 155 A, the legislature has now legislated to close that gap. For a structure such as that used by Ms B, constituted after 1 January 2024, the Ponder Rights Ltd limb – the image rights – might fall within the intended orbit of the provision.

Implications for sportspersons and remaining limitations

The IRCs employed in professional football, tennis and golf had incidentally relied on the service/royalty dichotomy to fall outside the scope of art. 155 A. That distinction has now been abolished. A non-resident sportsperson who receives sponsorship or image income through a controlled IRC, in respect of activities exercised in France, is potentially within the scope of the amended art. 155 A – both in respect of the services limb and the image rights limb.

Two reservations nonetheless remain. First, the business purpose safe harbour: an IRC with genuine economic substance (its own staff, a distinct commercial activity) may still have arguments to escape the provision. Second, for non-tax residents, only the portion of the payment relating to the image rights license within the French territory is taxable; as such, if the contract distinguishes between French tax remuneration and worldwide rights, only the specifically allocated portion is subject to tax in France. Consequently, the drafting of the contracts including image rights license becomes critical.

Further, double tax conventions continue to apply following the operation of art. 155 A, and certain treaties may neutralize the application of art. 155 A[3] – except where they contain an anti-IRC clause expressly targeting not only artists and sportspersons but models (as is the case in the France-Luxembourg or France-Germany double tax treaties).

The question of whether the artists/sportspersons clause in double tax treaty which are aligned with OECD-model art. 17 – which does not apply to models – may operate to override the application of the amended art. 155 A remains open and is likely to generate further litigation.

Conclusions

Behind the glamour lies a question of considerable fiscal and legal significance. Although the talent at the center of the dispute has worked as a model, the issues the case shed lights on – the adequacy of the domestic legal basis invoked by the French tax administration in presence of an IRC, the role of anti-avoidance rules when a structure is subjected to judicial scrutiny, and the proper scope of art. 17 of bilateral tax treaties – are precisely those that arise whenever a non-resident athlete or pilot channels income through a foreign corporate vehicle. In that sense, the decision speaks well beyond the world of fashion.

The judgment of 12 March 2026 reveals the limits of the French anti-avoidance framework as it applies to the taxation of non-residents operating through interposed companies. By relying solely on art. 164 B and the UK-France double tax convention, the French tax authorities selected questionable grounds: one requires direct receipt, which was absent; the other allocates taxing rights but does not itself create a charge to tax.

Art. 155 A was available but was not deployed for unexplained reasons. The Finance Act 2024 has further strengthened this provision by bringing image rights within its scope, closing the gap exposed by recent cases. For sportspersons, whose IRC structures are materially similar to that used by Ms B, the message is unambiguous: art. 164 B only remains incapable of allocating the right to tax in the absence of direct receipt, but the reformed art. 155 A now provides the French tax administration with a new tool – covering both services and image royalties – provided that it elects to deploy it. Properly documenting the place of supply and involving a local tax advisor in the review of the contract becomes even more crucial than before.