FRANCE Law and Practice Contributed by: Alexis Popov, Martin Serre and Stéphane Duchesne, &Co Advisory
5. Adjustments 5.1 Upward Transfer Pricing Adjustments French rules do not prevent taxpayers from mak - ing transfer pricing adjustments after filing their tax returns. Transfer pricing adjustments may be made through amended tax returns and may trigger late payment interest under Article 1727 of the French Tax Code, as well as potentially give rise to penalties. The filing of amended tax returns may also attract scrutiny from the French Tax Authorities and could lead to the initia - tion of a tax audit. Where a transfer pricing adjustment results in an overstatement of taxable income, the taxpayer may seek relief by filing a formal claim ( réclamation con- tentieuse ) pursuant to Article R190–1 of the French Tax Procedure Code (LPF). Such claims must be sup - ported by robust documentation and filed within the statutory deadline, which is generally 31 December of the second year following the year of payment or assessment, in accordance with Article R196–1 of the LPF. 5.2 Secondary Transfer Pricing Adjustments Where a primary adjustment is made under Article 57 of the CGI, the corresponding amount is treated as a deemed distribution. This treatment may trigger with - holding tax in accordance with French domestic tax law, applicable tax treaties and/or EU directives. French law provides for a formal mechanism that allows taxpayers to neutralise secondary withholding tax adjustments. This mechanism operates through a dedicated procedure that requires the repatriation of cash within a specific timeframe, as set out in Article L62 A of the FTPC. In addition, transfer pricing reassessments may result in a reassessment of CVAE ( contribution sur la valeur ajoutée des entreprises ).
6. Cross-Border Information Sharing 6.1 Sharing Taxpayer Information France relies on an extensive international framework for the exchange of tax information. Its double tax treaty network covers more than 160 jurisdictions and includes exchange-of-information provisions based on Article 26 of the OECD Model Tax Convention. This framework is further complemented by the Multilat - eral Convention on Mutual Administrative Assistance in Tax Matters, as well as EU Directives on Adminis - trative Cooperation (DAC), including DAC 3, DAC 6, and DAC 7. In practice, the French Tax Authorities regularly rely on these mechanisms in transfer pricing audits to obtain information from foreign jurisdictions and to verify the consistency of multinational group positions. Where the FTA request information from foreign tax authorities, the statutory limitation period may be extended pursuant to Article L188 A of the French Tax Procedure Code. Subject to certain conditions, the reassessment period is extended until the end of the year following the year in which the requested information is received, and in any event no later than the end of the third year following the year in which the initial limitation period expired. According to official statistics published by the French Ministry of Economy and Finance, the FTA made several thousand international information requests each year in recent periods, including thousands of requests relating to corporate income tax matters. These figures illustrate the increasing use of cross- border administrative co-operation in the context of tax audits. 6.2 Joint Audits Joint audits are authorised under Article L45 of the LPF and allow the FTA to conduct co-ordinated examinations with other EU member states. Although they are still relatively limited in number, joint audits are increasingly used in complex cases, particularly involving large multinational groups. They facilitate direct exchanges between tax authorities and reduce the risk of inconsistent positions.
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