CMS Expert Guide to Transfer Pricing Documentation in France

Under article L 13 AA of the French tax procedure code (“FTPC”), legal entities established in France, having intragroup transactions with related parties established abroad, are subject to the documentation requirement if:

1. they have an annual turnover (taxes excluded), or gross balance sheet asset value of at least EUR 150 million (hereafter “the minimum threshold”), or
2. at the close of the tax year, they directly or indirectly hold more than half of the financial or voting rights in an entity which meets the minimum threshold (being a legal entity, body, trust or comparable institution established or constituted in France or outside France), or
3. at the close of the tax year, more than half of their financial or voting rights are directly or indirectly held by an entity which meets the minimum threshold, or
4. they belong to a French tax consolidation group under article 223 A or 223 A bis of the French tax code (“FTC”), and that group includes at least one legal entity meeting one of the requirements above.

Note that the EUR 150 million minimum threshold applies to financial years opened as from 1 January 2024. For financial years opened prior to that date, the minimum threshold amounts to EUR 400 million.

The French Tax Authorities’ (“FTA”) guidelines (BOFiP BOI-BIC-BASE-80-10-40-20180718, §10) indicate that the expression “legal entities established in France” include foreign legal entities having a permanent establishment (“PE”) in France. In this situation:

• the conditions mentioned in (A) above would be considered to be fulfilled if they were fulfilled at the level of the French PE or of the foreign legal entity
• the conditions mentioned in (B) above would be considered to be fulfilled if they were fulfilled at the level of the French PE
• the conditions mentioned in (C) above would be considered to be fulfilled if they were fulfilled at the level of the foreign legal entity.

For entities outside the scope of this legislation, there is no formal TP documentation requirement. However, under article L13 B of the FTPC, if the FTA gather information, in the course of a tax audit, which tends to indicate that the enterprise in question has made an indirect transfer of profits to a related non-French entity, they may require certain documents and information to be produced. The taxpayer then has a maximum of 3 months to provide the information required. In order to comply with this time frame, French companies which are not subject to the documentation requirement, but whose transactions with foreign associated enterprises are significant, generally document their TP policy in advance.

2.1 Which transactions must be documented (all transactions with associated enterprises, or only those which exceed a particular threshold)? 

The documentation must cover all transactions between the legal entity established in France and associated enterprises established outside of France. Transactions between a company’s head office and its branches located in other tax jurisdictions must also be described in the documentation.

According to the official guidelines of the FTA (BOFiP BOI-BIC-BASE-80-10-40-20180718, § 60, 360 and 370), the notion of transaction refers to any operation that may have an impact on the net taxable profit of the enterprise. The categories to be taken into account are in particular the following:

• those corresponding to income or expenses: sales or purchases of goods, services, commissions, patent royalties, trademark royalties, know-how royalties, other intellectual property rights royalties, financial guarantees, financial income or expenses and other income or expenses
• those corresponding to acquisitions and disposals of assets relating to: patents, trademarks, goodwill, financial assets, intangible assets, tangible assets and real estate.

Though it is not indicated in the law, according to the official guidelines of the FTA (BOFiP BOI-BIC-BASE-80-10-40-20180718, §350), the transactions to be documented are those for which the amount, as reported in the enterprise’s statutory accounts, aggregated by category, exceeds EUR 100,000 for the fiscal year.

2.2 What is the definition of “associated enterprises” for the purposes of this requirement (in particular, are transactions between a permanent establishment and its head office in the scope of the documentation requirement)? 

Associated enterprises are entities (established or constituted outside of France) with which dependency ties exist. Such dependency ties are deemed to exist between two enterprises where:

• one enterprise directly or indirectly owns the majority of the share capital of the other, or effectively exercises decision-making powers within the other enterprise
• both enterprises are under the control of the same third enterprise (control being defined as above).

2.3 For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on transfer pricing documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD? 

Since 1 January 2018, the content of the French TP documentation requirement is consistent with the model proposed by the OECD TP Guidelines.

Indeed, the “standard” content encompasses the two levels of documentation proposed by the OECD TP Guidelines:

• general information concerning the group of associated enterprises – Master File
• specific information concerning the legal entity established in France – Local File.

In the Master File, the following information must be provided:

• chart illustrating the group’s legal and ownership structure and geographical location of operating entities
• important drivers of business profit
• description of the supply chain for the group’s five largest products and/or service offerings by turnover and for any other products and/or services amounting to more than 5% of group turnover
• list and brief description of important service arrangements between members of the group, other than research and development (“R&D”) services, including a description of the capabilities of the principal locations providing important services and TP policies for allocating services costs and determining prices to be paid for intragroup services
• description of the main geographic markets in which the group’s goods and services are sold
• functional analysis describing the principal contributions to value creation by individual entities within the group, i.e. key functions performed, important risks assumed and important assets used
• description of important business restructuring transactions, acquisitions and divestitures occurring during the fiscal year
• general description of the group’s overall strategy for the development, ownership and exploitation of intangibles, including location of principal R&D facilities and location of R&D management
• list of intangibles or groups of intangibles of the group that are important for TP purposes and which entities legally own them
• list of important agreements among identified associated enterprises related to intangibles, including cost contribution arrangements, research service agreements and licence agreements
• general description of the group’s TP policies related to R&D and intangibles
• general description of any important transfers of interests in intangibles among associated enterprises during the fiscal year concerned, including the entities, countries and compensation involved
• general description of how the group is financed, including important financing arrangements with unrelated lenders
• identification of any members of the group that provide a central financing function for the group, including the country under whose laws the entity is organised and the place of effective management of such entities
• general description of the group’s general TP policies related to financing arrangements between associated enterprises
• group’s annual consolidated financial statement for the fiscal year concerned if otherwise prepared for financial reporting, regulatory, internal management, tax or other purposes
• list and description of the group’s existing unilateral advance pricing agreements (“APAs”) and other tax rulings relating to the allocation of income among countries.

In the Local File, the following information must be provided:

• description of the management structure of the local entity, a local organisation chart
• description of the business and business strategy pursued by the local entity including an indication whether the local entity has been involved in or affected by business restructurings or intangibles transfers in the present or immediately past year and an explanation of those aspects of such transactions affecting the local entity
• description of the material controlled transactions with associated enterprises and the conditions in which such transactions take place
• amount of intragroup payments and receipts for each category of controlled transactions involving the local entity broken down by tax jurisdiction of the foreign payor or recipient
• identification of associated enterprises involved in each category of controlled transactions and the relationship amongst them
• copies of all material intercompany agreements concluded by the local entity
• detailed comparability and functional analysis of the taxpayer and relevant associated enterprises with respect to each documented category of controlled transactions, including any changes compared to prior years
• indication of the most appropriate TP method with regard to the category of transaction and the reasons for selecting that method
• indication of which associated enterprise is selected as the tested party, if applicable, and an explanation of the reasons for this selection
• summary of the important assumptions made in applying the TP methodology
• if relevant, an explanation of the reasons for performing a multi-year analysis
• list and description of selected comparable uncontrolled transactions, and information on relevant financial indicators for independent enterprises relied on in the TP analysis, including a description of the comparable search methodology and the source of such information
• description of any comparability adjustments performed, and an indication of whether adjustments have been made to the results of the tested party, the comparable uncontrolled transactions, or both
• description of the reasons for concluding that relevant transactions were priced on an arm’s length basis based on the application of the selected TP method
• summary of financial information used in applying the TP methodology
• copy of existing unilateral and bilateral/multilateral APAs and other tax rulings to which the FTA is not a party and which are related to controlled transactions with the local entity
• annual local entity financial accounts for the fiscal year concerned
• Information and allocation schedules showing how the financial data used in applying the TP method may be tied to the annual financial statements
• summary schedules of relevant financial data for comparables used in the analysis and the sources from which that data was obtained.

Under article L 13 AB of the FTPC, “additional” documentation must be provided where transactions are undertaken with one or more associated enterprise(s) established in a non-cooperative State or territory (within the meaning of article 238-0 A of the FTC). The “additional” documentation should include, for each associated enterprise, all documents required from companies which are subject to corporate income tax, including the balance sheet and profit and loss account drawn up in accordance with French GAAP (as provided for by the French CFC rules – article 209 B of the FTC). On 16 February 2024, the list of non-cooperative States or territories is as follows (this list is updated regularly):

•  American Samoa
• Anguilla
• Antigua and Barbuda
• Bahamas
• Belize
• Fiji
• Guam
• Palau
• Panama
• Russia
• Samoa
• Seychelles
• Trinidad and Tobago
• Turks and Caicos Islands
• U.S Virgin Islands
• Vanuatu

2.4 For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to chapter V of the OECD transfer pricing guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between the local requirements and the OECD approach? 

See above

2.5 Do taxpayers which are not established in your jurisdiction need to undertake to provide any specific information upon request? Can your tax authorities require the taxpayer in your jurisdiction to provide information which is located in another state? 

The FTA may only request information from French taxpayers. In practice, such requested information can include information located in another State.

To obtain information located in another State, the FTA can request the assistance of foreign tax authorities under the exchange of information provisions of the applicable treaty.

2.6 If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)? 

The FTA generally accept regional benchmark studies and, in particular, pan-European benchmark studies when a French taxpayer is involved.

French administrative guidelines provide that the benchmark studies should contain the most recent information available at the invoicing time of the transactions. Where there has been no change to the circumstances under which the activity is carried out, it is permissible for the benchmark studies to be updated every 3 years. However, the financial data resulting from these comparables must be updated every year (BOFIP BOI-BIC-BASE-80-10-40-20180718, §580).

2.7 If comparable studies are to be provided in general, are safe harbours/specific circumstances exempting taxpayers from preparing benchmark studies (such as the EU Joint Transfer Pricing Forum guidelines on low value adding services or revisions to chapter VII of the OECD transfer pricing guidelines about low value adding intragroup services) in your jurisdiction or are there situations in which tax authorities do not request benchmark studies? If so, in which circumstances taxpayers are exempted from benchmark studies? 

The FTA generally accept regional benchmark studies and, in particular, pan-European benchmark studies when a French taxpayer is involved.

French administrative guidelines provide that the benchmark studies should contain the most recent information available at the invoicing time of the transactions. Where there has been no change to the circumstances under which the activity is carried out, it is permissible for the benchmark studies to be updated every 3 years. However, the financial data resulting from these comparables must be updated every year (BOFIP BOI-BIC-BASE-80-10-40-20180718, §580).

2.8 What language(s) are to be used by taxpayers in submitting the TP documentation? 

The FTA generally accept regional benchmark studies and, in particular, pan-European benchmark studies when a French taxpayer is involved.

French administrative guidelines provide that the benchmark studies should contain the most recent information available at the invoicing time of the transactions. Where there has been no change to the circumstances under which the activity is carried out, it is permissible for the benchmark studies to be updated every 3 years. However, the financial data resulting from these comparables must be updated every year (BOFIP BOI-BIC-BASE-80-10-40-20180718, §580).

The documentation must be made available to the FTA on the date the tax audit of the French enterprise begins, i.e. on the date of the first on-site arrival of the tax inspector as mentioned in the notification of tax audit.

The documentation is generally made available in an electronic format: “pdf” format for the report and “Excel” format for the charts.

Where the audited enterprise does not provide the documentation, or where it provides incomplete documentation, the FTA must send a notice to provide or, as the case may be, complete the documentation, within a 30-day period (though it is not provided for by the law, administrative guidelines indicate that, upon written and duly motivated request from the taxpayer, an extended delay can be granted by the FTA; the total delay cannot however exceed 2 months; BOFiP BOI-BIC-BASE-80-10-40-20180718, §630). This notice must specify the documents or supplementary information required and the penalties applicable in the event of non-compliance.

Needless to say, the FTA can request additional information (e.g. agreements, invoices) to audit any intragroup transaction.

If the audited enterprise does not provide the documentation required under articles L 13 AA and L 13 AB of the FTPC, or if it provides incomplete documentation within the period mentioned above, further to a formal request from the FTA to do so, depending on the seriousness of the default, the penalty can reach the higher of the following amounts:

• 0.5% of the amount of transactions non duly documented, or
• 5% of the TP reassessment made by the FTA on transactions non duly documented.

However, the minimum amount for the penalty is EUR 50,000.

Therefore, a documentation-related penalty can apply even in the absence of reassessment by the FTA of the TP policy of the taxpayer.

The absence of documentation or incomplete documentation does not reverse the burden of proof as regards the arm’s length character of the transactions: to make a reassessment, the FTA still need to demonstrate that the transactions do not comply with the arm’s length principle.

However, for financial years opened as from 1 January 2024, the burden of proof will be reversed in cases where an enterprise obliged to provide TP documentation under the provisions described above does not apply the TP policy described in such documentation. In such a situation, the FTA can make a reassessment amounting to the difference between the TP policy effectively applied and the TP policy described in the documentation; however the taxpayer keeps the possibility to demonstrate that the TP policy effectively applied does not lead to a transfer of profit outside of France.

Administrative guidelines confirmed that the documentation-related penalty does not constitute a serious penalty within the meaning of article 8-1 of the European Arbitration Convention of 23 July 1990 (BOFiP BOI-CF-INF-20-10-40-20170301, §130). Therefore, such a penalty does not prevent the enterprise from using the procedures provided for by that Convention, or the MAPs provided for by bilateral income tax treaties.

A priori, the same position should apply for the procedure provided for by the Council Directive (EU) 2017/1852 of 10 October 2017 on tax dispute resolution mechanisms in the EU.

N/A

The obligation to file a CbCR has been introduced into the FTC (at article 223 quinquies C) by the Finance Bill for 2016 (form n°2258-SD).

The French CbCR requirement applies to fiscal years starting as from 1 January 2016. The report has to be filed within 12 months following the end of the fiscal year concerned (e.g. at the latest on 31 December 2024 for fiscal years ending 31 December 2023).

In principle, those subject to the obligation to file a CbCR in France are legal entities established in France that:

• establish consolidated accounts
• own or control, directly or indirectly, one or several legal entities established outside of France or that have branches outside of France
• realise a yearly consolidated turnover (taxes excluded) of at least EUR 750 million, and
• are not held by one or several legal entities situated in France and obliged to file the CbCR, or by one or several legal entities established outside of France and obliged to file a similar declaration under a foreign legislation.

A legal entity established in France that is owned or controlled, directly or indirectly, by a legal entity established in a State or territory that is not on the list of the “Participating States or Territories” (as defined below) and that would be obliged to file in CbCR in France if it had been established in France, must file a CbCR in France if:

• this French legal entity has been designated by the group for that purpose and has informed accordingly the FTA, or
• it cannot demonstrate that another group entity, situated in France or in a Participating State or Territory, has been designated for that purpose.

The Participating States or Territories are those which:

• have adopted a legislation providing for the filing of a CbCR that is similar to the French legislation
• have concluded with France an agreement allowing the automatic exchange of CbCR, and
• comply with the obligations set forth by this agreement. The law indicates that the list of Participating States or Territories will be published in a ministerial order.

This declaration must be filed electronically. It must be filed in English.

The content of the CbCR is fully in line with the OECD model. It was published in a decree (n° 2016-1288 of 29 September 2016). The FTA published the format of such declaration (form 2258-SD). The CbCR must be filed electronically with the FTA.

French legal entities must indicate in their tax return that they are supposed to file the CbCR, that they were designated for that purpose or that another entity of the group will file the CbCR for the group (in this latter case, they must indicate the identity and location of such entity).

Failure to file the CbCR on time could lead to a maximum penalty of EUR 100,000.

In addition, omissions or inaccuracies are subject to a penalty of EUR 15 per omission or inaccuracy (with a minimum penalty of EUR 60 and a maximum of EUR 10,000). This penalty is not applicable in the case of a first offence committed during the current calendar year or the 3 preceding years, where the person concerned has remedied the offence, either spontaneously or within 30 days of a request from the tax authorities. 

On 27 January 2016, France signed the Multilateral Competent Authority Agreement on the Exchange of CbCR. Besides, Directive 2016/881 of 25 May 2016 amended Directive 2011/16/EU by adding a mechanism for the automatic and mandatory exchange of CbCR between Member States.

The latest update of the list of countries (EU Member States and non-EU countries) participating in the automatic exchange of CbCR with France is available in the Ministerial Decree no. ECOE2412415A of 26 June 2024.

The European directive (2021/2101) of 24 November 2021 introducing the public CbCR was transposed into French law by Ordonnance no. 2023-483 of 21 June 2023, and its implementing Decree no. 2023-493 and Ministerial Decree no. ECOT2316682A of 22 June 2023.

From financial years beginning as of 22 June 2024, certain enterprises and branches will be required to report annually, on a country-by-country basis, information regarding income tax. This information will be public (unlike data collected under the (non-public) CbCR described above that are confidential).

The reporting obligation applies in particular to:

• ultimate parent companies (i.e. a consolidating company that is not controlled by another company) and autonomous companies (i.e. companies that do not control another company, nor are controlled by another company) established in France when their consolidated or statutory turnover exceeds, for each of the last 2 consecutive financial years, EUR 750 million. However, they are not required to make such a declaration if the group or company concerned does not have a PE abroad 
• companies with turnover in excess of EUR 750 million at the end of 2 consecutive financial years, which are established in a country that is neither a Member State of the EU nor a party to the Agreement on the European Economic Area (“EEA”; Iceland, Liechtenstein, Norway) and which have a branch in France with turnover in excess of EUR 12 million at the end of 2 consecutive financial years. These foreign companies must also have a legal form comparable to that of a joint stock company or limited liability company, and must not control or be controlled by another company
• if the conditions mentioned below are met, (i) to French companies (other than a microenterprise or small business) controlled by a company which does not have its registered office in a Member State of the EU or another State party to the Agreement on the EEA, and (ii) to companies included in the consolidated financial statements of a company which does not have its registered office in a Member State of the EU or another State party to the Agreement on the EEA and which have a branch in France with sales in excess of EUR 12 million for 2 consecutive financial years. The companies established outside the EU or EEA mentioned above are those which meet the following cumulative conditions:
  • they have a legal form comparable to that of a joint stock company or a limited liability company
  • they have consolidated sales in excess of the EUR 750 million threshold for 2 consecutive financial years, and
  • they are not controlled by another company
  • they draw up consolidated accounts in which the assets, liabilities, equity, income and expenses are presented as those of a single economic entity, the largest group of companies.

The reporting obligation concerns the most recent of the 2 consecutive financial years. It covers all the activities of the above companies and controlled companies included in the consolidation. The report shall include the following information:

• company name
• brief description of the nature of the business
• number of full-time equivalent employees
• turnover
• profit or loss before income tax
• income tax due
• income tax paid on the basis of actual settlements
• retained profits.

This information must be presented separately for:

• each Member State of the EU and other State party to the Agreement on the EEA
• each tax jurisdiction which, at 1 March of the financial year for which the report is prepared, is on the EU list of non-cooperative countries and territories (known as the EU ‘grey list’)
• each tax jurisdiction which, at 1 March of the financial year for which the report is drawn up and at 1 March of the previous financial year, is on the list of countries and territories which do not yet comply with all international tax standards but which are committed to implementing reforms (known as the EU ‘black list’).

Information, the disclosure of which would be seriously prejudicial to the commercial position of the companies to which it relates, may be omitted from the report on a temporary basis. When this option is exercised, the report must clearly state the reasons for the omission. In addition, the omitted information must be published in a subsequent report no later than 5 years after the omission. However, some information cannot be omitted. This includes information relating to jurisdictions on the EU’s so-called grey or black lists.

The report must be filed with the commercial court clerk’s office within 12 months of the end of the financial year. In addition, as soon as it is filed, it must be made available free of charge to the public, for at least 5 consecutive years, on the website of the company, the branch in France or the company that has such a branch.

For companies whose financial year coincides with the calendar year, the first report must be published no later than 31 December 2026 for the financial year ending 31 December 2025.

Note that specific (public) reporting obligations also exist for:

• credit institutions: they must publish information on their international operations in an appendix to their annual accounts or in their management reports; credit institutions subject to this reporting obligation are exempt from the public CbCR described above
• companies in the mining, oil, gas or forestry sectors: they must produce a report on the various payments (e.g. taxes, production rights, discovery and production bonuses) made in each State in which they operate.

Yes, legal entities established in France may also be required to file each year with the FTA a document summarising their TP policy/documentation (this document is the TP declaration – form n°2257-SD).

The document to be filed with the FTA includes the following elements:

General information on the group of associated enterprises

• general description of the activity carried out, including the changes which occurred during the tax year
• list of the main intangible assets owned, notably patents, trademarks, trade names and know-how in relation with the enterprise filing the declaration; indication of the State or territory where the enterprise owning these intangible assets is established
• general description of the TP policy of the group, including the changes which occurred during the tax year.

Specific information concerning the filing enterprise

• description of the activity carried out, including the changes which occurred during the tax year
• statement of the transactions realised with other associated enterprises, classified by nature and amount, when the yearly aggregated amount by nature is above EUR 100,000; this statement also indicates where the associated enterprises are established
• presentation of the method(s) used to determine the TPs in compliance with the arm’s length principle, including the main method used and the changes that occurred during the tax year.

The TP declaration must be filed with the FTA within 6 months following the deadline for submitting the tax return. In principle, tax returns must be filed within 3 months from the end of the fiscal year, except for enterprises ending their fiscal year on 31 December.

For enterprises ending their fiscal year on 31 December Y, the tax return must be filed by the second business day following 1 May Y+1, so in this case the deadline to file the TP declaration is early November Y+1.

This declaration must be filed electronically. It must be filed in French.

For companies belonging to a French tax consolidation group, the declaration must be filed by the parent company of the tax consolidated group. The parent company must therefore file as many returns as there are companies in the tax consolidation group that are subject to the filing requirement.

Under article 223 quinquies B of the FTC, legal entities established in France must file a TP declaration if:

1. they have an annual turnover (taxes excluded), or gross balance sheet asset value of at least EUR 50 million, or
2. at the close of the tax year, they directly or indirectly hold more than half of the financial or voting rights in an entity which meets the threshold mentioned at (A) above (being a legal entity, body, trust or comparable institution established or constituted in France or outside of France), or
3. at the close of the tax year, more than half of their financial or voting rights are directly or indirectly held by an entity which meets the threshold mentioned at (A) above, or
4. they belong to a French tax consolidation group under article 223 A or 223 A bis of the FTC, and that group includes at least one legal entity meeting (A), (B) or (C) above.

Administrative guidelines exclude from the scope of the filing requirement companies which have no transaction with foreign related parties or carrying out transactions with foreign related entities for an amount below EUR 100,000 per nature of transactions (BOFiP BOI-BIC-BASE-80-10-30-20180718, §10).

The law does not provide for a specific penalty for a failure to file. Therefore, the provisions of article 1729 B of the FTC apply:

• in the absence of filing of the declaration, a penalty of EUR 150 applies
• omissions or inaccuracies are subject to a penalty of EUR 15 per omission or inaccuracy (with a minimum penalty of EUR 60 and a maximum of EUR 10,000).

These penalties are not applicable in the case of a first offence committed during the current calendar year or the 3 preceding years, where the person concerned has remedied the offence, either spontaneously or within 30 days of a request from the tax authorities.

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