FRANCE Law and Practice Contributed by: Alexis Popov, Martin Serre and Stéphane Duchesne, &Co Advisory
ties, such as distribution, manufacturing, or service provision. 3.2 Unspecified Methods In theory, taxpayers may rely on alternative methods where traditional OECD methods are not appropriate. The acceptance of such alternative methods depends on the taxpayer’s ability to demonstrate that the meth - od reflects the economic reality of the transaction, is supported by a robust functional analysis, and pro - duces an arm’s length outcome. In practice, however, methods other than those rec - ognised by the OECD are rarely relied upon by tax - payers. This is because such methods are generally less accepted by the FTA during audits and are not supported by French case law, which predominantly refers to OECD-consistent approaches. 3.3 Hierarchy of Methods French transfer pricing rules do not establish a formal hierarchy of methods and instead follow the OECD’s “most appropriate method” approach. However, it should be noted that recent case law has given priority to the CUP method, particularly where reliable internal comparables are available (see 14.2 Significant Court Rulings ). 3.4 Ranges and Statistical Measures French administrative guidance recognises that trans - fer pricing analyses generally result in a range of values derived from comparable transactions or companies, most commonly referred to as the interquartile range. In practice, the French Tax Authorities often rely on the median value of this range as the arm’s length result, particularly where the taxpayer does not justify the selection of a specific position within the range. French case law has further clarified this approach. • The reference to the median value may be appro - priate, depending on the circumstances (Conseil d’État, 6 June 2018, No 409645, GE Healthcare ). • Where a taxpayer relies on a point within the range other than the median, it must demonstrate that this position is supported by the functional analysis
and reflects the specific circumstances of the test - ed party. In the absence of such justification, the use of the median may be considered appropriate (CAA Paris, 22 November 2023, No 21PA06233,
SASU Menarini Diagnostics France ). 3.5 Comparability Adjustments
Aligned with the OECD Guidelines, French administra - tive doctrine provides that comparability adjustments should be made where material differences between the tested party and comparable companies affect the reliability of the transfer pricing analysis. In practice, the French Tax Authorities assess whether such adjustments are economically justified, consist - ently applied, and supported by sufficient documen - tation. Adjustments addressing identified differences are, in principle, accepted where they can be reliably quantified, in line with French administrative doctrine (BOI-BIC-BASE-80-10-10). However, in practice, these adjustments remain sub - ject to strict scrutiny. Certain types of adjustments, such as working capital adjustments, are relatively uncommon in France. This cautious approach reflects concerns regarding the reliability of publicly avail - able data, the sensitivity of the underlying financial assumptions, and the often-limited impact of such adjustments on the overall results. As a result, tax authorities tend to examine these adjustments closely and may challenge their application where they are not robustly supported. Accordingly, a failure to perform necessary compa - rability adjustments may lead to the rejection of the benchmarking analysis. Conversely, adjustments that are inappropriate or insufficiently substantiated may equally weaken the taxpayer’s position. In the context of financial transactions, recent case law reinforces the need for robust and well-substantiated adjustments where differences materially affect the reliability of the comparison. In particular, it confirms that taxpayers must ensure that interest rate bench - marks adequately reflect the specific characteristics of the transaction, including credit risk and prevailing economic conditions (CAA Paris, 18 December 2025, No 24PA01640).
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