Management fees are the amounts a parent or holding company charges its subsidiaries for central services: general management, finance, legal, HR, IT, purchasing. They are the most common intragroup recharge, and the most frequently challenged.
The economic logic is sound. Pooling support functions at group level costs less than duplicating them in every entity, and the entities that benefit should bear their share. The recharge is normally built with the cost-plus method, applied to a cost base spread through cost allocation keys.
What has to be proven is that the service exists, not that the price is fair. French case law is consistent on this: a subsidiary may deduct management fees only if it can show a real service, distinct from the shareholder's own oversight of its investment, and of genuine benefit to it. Costs a parent incurs in its capacity as shareholder, such as consolidating accounts or reporting to its own investors, are not rechargeable. A flat percentage of subsidiary revenue with no description of what was delivered is the profile most often rejected.
Duplication is the second trap. Where a subsidiary has its own finance director, recharging group financial management to it invites the question of what exactly was received.
Evidence is therefore operational rather than legal: what was delivered, to whom, when, at what cost. Phacet contributes on that side. The contract data extraction agent structures the service agreement, the invoice versus contract control agent checks each recharge against it, and the resulting audit trail is what a transfer pricing file rests on.
