FRANCE Law and Practice Contributed by: Véronique Millischer, Léna Sersiron, Eléonore d’Anthonay, Guillaume Nataf, Olivia Chriqui-Guiot, Pauline Celeyron, Damien Berruyer and Nella Picou, Baker McKenzie Paris
Documentation Requirements In line with OECD BEPS Action 13, France applies tiered TP documentation obligations based on size thresholds. French entities (companies or PEs of for - eign companies) with revenue or gross assets of at least EUR150 million – as well as their French affiliates (parent, subsidiary or member of the same French tax consolidated group) – must prepare a full master file and local file, to be provided upon request during a tax audit. The same entities must also file an annual TP form within six months of their corporate income tax return, the threshold being lowered to EUR50 million for this purpose. Country-by-Country Reporting French-headquartered multinational enterprise (MNE) groups with consolidated annual turnover of at least EUR750 million must file a country-by-country report (CbCR) within 12 months of the end of the relevant FY. French entities belonging to a foreign-headquar - tered MNE meeting the same threshold may also be required to file, where the CbCR is not filed in a juris - diction having an information exchange agreement with France. Advance Pricing Agreements and Dispute Resolution Companies may secure their TP positions through uni - lateral, bilateral or multilateral Advance Pricing Agree - ments. France participates in the OECD’s mutual agreement procedure (MAP) and the EU Arbitration Convention and is a signatory to the OECD Multilateral Instrument (MLI), which strengthens dispute resolution mechanisms – including mandatory binding arbitration – across France’s bilateral tax treaties. 5.7 Anti-Evasion Rules General Anti-Abuse and Evasion Rules French tax law includes a range of general anti- avoidance measures targeting artificial or tax-driven arrangements. Under the abuse of law ( abus de droit ) doctrine, the French tax authorities may disregard transactions that are fictitious or exclusively motivated by the circumvention of tax legislation, with penalties of up to 80%. The “mini” abuse of law rule, applica - ble to acts carried out from 1 January 2020 onwards, extends this approach to arrangements whose main
– rather than exclusive – purpose is to avoid or reduce tax. Certain preferential tax regimes are subject to spe - cific anti-abuse rules targeting fraudulent schemes and absence of substance (eg, the parent-subsidiary regime specific anti-abuse rule). Flows involving resi - dents of non-cooperative jurisdictions are generally subject to a 75% withholding tax rate (notably on interest payments, capital gains, fees and dividends) and denied tax deductibility or exclusion from certain tax regimes. Finally, treaty benefits may be denied where obtaining them was one of the main purposes of an arrange - ment or where the recipient is not the beneficial owner of the income. CFC Rules French controlled foreign corporation (CFC) rules apply to profits of foreign branches and subsidiaries that are more than 50% owned and established in tax- privileged jurisdictions, ie, where the local CIT payable is less than 60% of the French theoretical tax (a dif - ference of more than 40%). Such profits are subject to CIT in France in proportion to the French resident company’s shareholding. Within the EU, a safe har - bour limits the application of the CFC rules to purely artificial arrangements aimed at circumventing French tax legislation. Mandatory Disclosure Rules (DAC6) France has transposed the EU Directive on mandatory disclosure of cross-border tax arrangements (DAC6). Intermediaries (and, in certain circumstances, taxpay - ers) must report cross-border arrangements meeting one or more prescribed hallmarks to the French tax authorities within 30 days of the relevant trigger event. The reported information is automatically exchanged with the tax authorities of other Member States. 5.8 Tariffs In France, customs tariffs are set at EU level by the Council on a proposal from the European Commis - sion (EC). The level of duty depends on three factors: the product classification; its origin; and the possible application of trade agreements, quotas or restric - tions.
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