BDO Transfer Pricing News

France - France introduces changes to transfer pricing rules

France’s Finance Bill for 2024, published on 27 September 2023, includes measures on the implementation of transfer pricing documentation requirements. The draft law is expected to be adopted, with no changes, at the end of December.
Transfer pricing documentation
The Finance Bill proposed lowering the net turnover/gross assets threshold for compulsory transfer pricing documentation from EUR 400 million to EUR 150 million. Under current rules, companies with annual turnover or gross balance sheet assets exceeding EUR 400 million must provide documentation of their transfer pricing policies within 30 days upon request from the tax authorities.

The bill also proposes increasing the minimum penalty applicable for total or partial non-compliance with the documentation requirements (after formal notice from the tax authorities) from EUR 10,000 to EUR 50,000.

The bill calls for the Introduction of a presumption of indirect transfer of profit when the transfer pricing policy implemented differs from the method described in the transfer pricing documentation, and the burden of proof would fall on the taxpayer rather than the tax authorities. The presumption would be rebuttable by any means.

The amount of the presumed indirect transfer of profit would be equal to the difference between (i) the amount of the transfer pricing determined according to the method actually used by the company and (ii) the amount that would have been reached if the method described in the documentation made available to the tax authorities had been followed.

These provisions have been adopted by the National Assembly without any change by the Senate.
Transfer of hard-to-value intangible assets/rights
The bill also proposed a provision whereby the tax authorities would be able to reassess the value of hard-to-value intangibles transferred by a French company to a foreign related party based on an “ex post” analysis years after the transfer. The provision includes exceptions in the following cases:
  • The taxpayer provides detailed information on the forecasts used at the time of the transfer to determine the prices, and establishes that any significant differences between the forecasts and the actual results are due either to the occurrence of unforeseeable events at the time of the price determination, or to the realisation of foreseeable events, provided that their probability was not significantly underestimated or overestimated at the time of the transaction.
  • The transfer is covered by an advance pricing agreement (bilateral or multilateral) in force during the time period in question between the jurisdiction of the transferee and that of the transferor.
  • The difference between the valuation resulting from the forecasts drawn up at the time of the transfer and the valuation based on actual profits is less than 20%.
  • A marketing period of five years has elapsed after the year in which the asset or right first generated income from an entity unrelated to the transferee and, during that period, the difference between the forecasts made at the time of the transaction and the actual results is less than 20%.
The statute of limitations period would extended from three to six years following the year during which the tax is due.

Celine Pasquier
BDO in France