FRANCE Law and Practice Contributed by: Alexis Popov, Martin Serre and Stéphane Duchesne, &Co Advisory
in a penalty equal to the greater of (i) 0.5% of the value of non-documented transactions, or (ii) 5% of the transfer pricing reassessments notified in relation to those transactions, subject to a minimum amount of EUR50,000. This minimum penalty applies to financial years opened as from 1 January 2024. For financial years opened prior to that date, the applicable minimum penalty is EUR10,000. These penalties apply only where the documentation is not provided or remains incomplete after the expiry of a formal 30-day notice period. From a procedural perspective, in France, transfer pricing documentation must be available as from the first day of a tax audit and is typically requested by the FTA during the initial meeting. We also observe an increasingly systematic approach by the FTA in requesting transfer pricing documenta - tion. Formal notices are being issued promptly and routinely, including in respect of companies that became subject to the documentation requirements only as from 2024. 8.2 Transfer Pricing Documentation France has implemented the OECD three-tiered trans - fer pricing documentation framework, which compris - es a Master File, a Local File, and country-by-country reporting (CbCR). In addition, a simplified transfer pricing obligation (the “TP form”) applies to certain taxpayers. Local and Master File requirements apply to entities that meet the thresholds set out in Article L13 AA of the French Tax Procedure Code (LPF), namely statuto - ry turnover or gross assets of at least EUR150 million. The documentation must be contemporaneous and must accurately reflect the taxpayer’s transfer pricing policy. It must include, in particular, a detailed func - tional analysis, a description of intra-group transac - tions, and the selection and application of the transfer pricing method. A specific feature of the French threshold test for the application of Article L13 AA of the LPF is that it is assessed not only at the level of the French entity
itself, but also at the level of: (i) any entity that directly or indirectly holds more than 50% of the shares or voting rights in the French entity, and (ii) any entity that is directly or indirectly more than 50% held by the French entity. As a result, for example, where a parent company generates EUR1 billion in turnover and holds a French distribution subsidiary generating EUR2 mil - lion in turnover, that French subsidiary is nevertheless subject to the French transfer pricing documentation requirements. It should also be noted that the threshold is assessed on a statutory basis rather than on a consolidated basis. It should further be noted that only transactions exceeding EUR100,000 per transaction category are required to be documented through detailed func - tional and economic analyses. The transfer pricing documentation must be made available to the French Tax Authorities at the start of a tax audit. Where a taxpayer fails to provide the required documentation, the tax authorities may issue a formal notice (“ mise en demeure ”). Following such notice, the taxpayer has 30 days to provide complete documentation. For entities that do not fall within the scope of Article L13 AA of the LPF, the tax authorities may still request transfer pricing information under Article L13 B of the LPF, where there is a presumption of profit trans - fer abroad. This request is also subject to a 30-day response deadline. In practice, the FTA strictly enforce these timelines. Incomplete or late responses are frequently used to justify penalties and may weaken the taxpayer’s posi - tion during a tax audit. This reinforces the importance of having transfer pricing documentation readily avail - able and aligned with the actual conduct of the par - ties. A simplified transfer pricing documentation obli - gation also exists in the form of an annual transfer pricing disclosure to be filed electronically within six months following the filing of the corporate income tax
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