Josh Finfrock, Senior Manager in our Transfer Pricing division, gives insight into the updated transfer pricing documentation rules affecting qualified French taxpayers.
As part of the Finance Bill for 2014 partially enacted by the French Government, updated transfer pricing documentation rules will affect qualified French taxpayers (including French permanent establishments of foreign companies). As noted in Section L13AA of the French Tax Procedure Code, the updated transfer pricing documentation rules affect French taxpayers that satisfy one or more of the following:
Turnover or gross assets equal to or exceeding EUR 400 million;
- Owns, directly or indirectly, at least 50% of a company that meets the EUR 400 million criteria;
- More than 50% of the entity’s capital or voting rights are owned, directly or indirectly, by French or foreign entities that meet the EUR 400 million criteria; or
- Part of a consolidated tax group in France and at least one group company meets any of the above criteria.
These updated rules now require French taxpayers to file transfer pricing documentation within 6 months of filing their tax return, whereas the previous transfer pricing documentation rules only required French taxpayers to provide transfer pricing documentation if requested during a tax audit.
When documenting, the qualified French taxpayers will now be required to disclose a detailed summary of the entity and the related affiliates. They will also be required to provide a detailed summary of each intra-group transaction valued over EUR 100,000.
French taxpayers that fail to file transfer pricing documentation properly (in proper detail, in a timely manner, etc.) may be penalized up to 5% of the reassessment by the French Tax Authorities.