FRANCE Law and Practice Contributed by: Alexis Popov, Martin Serre and Stéphane Duchesne, &Co Advisory
4. Intangibles 4.1 Notable Rules
documentation, including detailed valuation mod - els, sensitivity analyses, and clear justification of key assumptions. In the absence of such documentation, the authorities frequently rely on ex-post evidence to challenge pricing positions. This mechanism significantly strengthens the position of the FTA in audits involving intangible assets, par - ticularly in the context of business restructurings that entail the implicit transfer of intangibles. In addition, the implementation of DAC6 has further enhanced transparency requirements by introducing specific disclosure obligations. 4.3 Cost Sharing/Cost Contribution Arrangements Cost contribution arrangements (CCAs) are recog - nised under French administrative doctrine and are established in line with the OECD Guidelines. In practice, the French Tax Authorities focus on the consistency between the participants’ contributions and their expected benefits, as well as on the alloca - tion of risks and decision-making functions, and the economic substance of the arrangement in compari - son to its contractual terms. Particular attention is paid to situations in which a participant is allocated a share of expected returns without demonstrating corresponding contributions or effective control over the relevant risks. CCAs are subject to increasing scrutiny, especially where they involve the development or centralisa - tion of intangibles. In such cases, the tax authorities assess whether the arrangement effectively results in an implicit transfer of an intangible asset, which should be appropriately compensated. In practice, insufficiently documented CCAs, or arrangements relying on simplified allocation keys, are frequently challenged. Taxpayers are therefore expected to provide detailed documentation support - ing the identification of participants, the nature and valuation of contributions, and the methodology used to allocate costs and expected benefits.
Transactions involving intangibles are assessed in accordance with the general principles set out in Arti - cle 57 of the French Tax Code and the OECD Transfer Pricing Guidelines, as reflected in French administra - tive doctrine. The analysis focuses on identifying eco - nomically significant intangibles and allocating value based on the functions performed, assets used and risks assumed by each party, in particular through the DEMPE framework (Development, Enhancement, Maintenance, Protection and Exploitation). In practice, particular attention is paid to the con - sistency between contractual arrangements and the parties’ actual conduct. In addition, the French Tax Authorities have increased their scrutiny of transac - tions involving intangibles, especially in the context of business restructurings that may involve an implicit transfer of intangible assets (such as business clo - sures, relocation of turnover or projects, or the transfer of key personnel within a group). As a result, taxpayers are expected to substantiate intangible-related transactions with robust bench - marking studies and detailed supporting documenta - tion, including dedicated ad hoc reports, benchmark - ing analyses, and comprehensive transfer pricing documentation (Local File and Master File). 4.2 Hard-to-Value Intangibles As introduced by the Finance Law for 2024, the FTA may rely on ex-post outcomes to assess whether the pricing of a HTVI transaction is consistent with the arm’s length principle. Where the difference between the valuation derived from ex-ante financial forecasts and the valuation based on ex-post actual outcomes exceeds 20%, the authorities may reassess the initial valuation, unless the taxpayer can demonstrate that the original assumptions were reasonable and based on information available at the time of the transaction. Pursuant to Article L169 of the FTPC, the reassess - ment period is extended to six years, thereby increas - ing audit exposure for such transactions. In practice, the FTA actively applies these rules and expects taxpayers to maintain robust contemporaneous
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