FRANCE Law and Practice Contributed by: Alexis Popov, Martin Serre and Stéphane Duchesne, &Co Advisory
a comprehensive framework into the French Tax Code (Articles 223 VA to 223 WW). This framework estab - lishes the three GloBE mechanisms: • the Income Inclusion Rule; • the Qualified Domestic Minimum Top-up Tax; and • the Undertaxed Profits Rule. Administrative guidance was published on 8 October 2025, providing detailed clarification on key concepts, including intermediary entities, permanent establish - ments, and the determination of consolidated financial statements for GloBE purposes. Further updates are expected as additional OECD guidance is released. From a compliance perspective, the first Global Infor - mation Return (GIR) is due by 30 June 2026. Failure to comply may result in penalties of up to EUR100,000 per filing, capped at EUR1 million per fiscal year at the group level. In practice, Pillar Two is expected to increase scru - tiny of group structures and effective tax rates and reinforces the need for consistency between transfer pricing outcomes and global tax positions. As regards Pillar One, France continues to support a co-ordinated multilateral approach but has not enacted implementing legislation, as discussions remain ongoing at the international level. In the inter - im, France has not relinquished its domestic instru - ments: the digital services tax, whose constitutionality was confirmed by the French Constitutional Council in September 2025, remains in force irrespective of the outcome of international negotiations. The impact of Amount B is addressed in the following section. 9.5 Pillar One Amount B France has not formally implemented Pillar One, Amount B. However, in updated administrative guidance dated 23 July 2025 (BOI-BIC-BASE-80-10-50), the French Tax Authorities indicated their intention to comply with the international commitments undertaken in this area. Accordingly, the authorities have stated that they will adopt the necessary measures to prevent double taxation that may arise from the unilateral application
of Amount B by certain jurisdictions, provided that the following three cumulative conditions are met. • The jurisdiction concerned is a member of the OECD Inclusive Framework. • A tax treaty is in force between France and that jurisdiction. • That jurisdiction effectively applies Amount B to distributors operating in its market. 9.6 Entities Bearing the Risk of Another Entity’s Operations French transfer pricing rules allow risks to be allocated within a group, provided that such allocation is con - sistent with the functional analysis. An entity may be contractually assigned risks relating to another entity’s operations. However, for this allo - cation to be recognised, the entity must demonstrate that it has the financial capacity to bear those risks and that it effectively exercises control over them. This includes the ability to make and influence key deci - sions relating to the assumption and management of those risks. This approach is aligned with the OECD Guidelines on risk control. In practice, the French tax authorities closely exam - ine arrangements involving limited-risk entities. Guar - anteed returns or stable margins are accepted only where the functional profile supports such characteri - sation. Situations in which losses are allocated to enti - ties described as routine are frequently challenged, particularly where there is insufficient evidence that those entities exercise an adequate level of control over the relevant risks. 9.7 Allocation of Profits to Permanent Establishments (PEs) French practice is broadly aligned with the Author - ised OECD Approach. This approach involves identi - fying the functions performed, assets used, and risks assumed by the permanent establishment, and attrib - uting profits accordingly, in line with Article 5 of the OECD Model Tax Convention. Internal dealings between an entity and its permanent establishment are recognised for transfer pricing pur -
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