Worldwide transfer pricing reference guide 2014

France
Taxing authority and tax law
Tax authority: Generally referred to as the French Tax Authorities (FTA), or Direction Générale des Finances Publiques (DGFiP);
formerly Direction Générale des Impôts (DGI). The Mission d’expertise juridique et économique internationale (MEJEI) department
includes now the teams in charge of MAP and APA.
Tax law, main technical provisions:
• French Tax Code (FTC) Articles 57 (arm’s length principle), 238A (reversal of burden of proof in case of tax haven),
and 209B (CFC regulation)
• French Procedural Tax Code (FPTC) Articles L 10, L 13AA, L 13AB, L 13B, L 80B and L 188A
• Case law about application of the theory of Abnormal Act of Management and Article 57 of the FTC
• Thin capitalization rules are also covered by Articles 212 and 39–1 of the FTC
Relevant regulations and rulings
Administrative doctrine mainly pertaining to Articles 57 and 238A of the FTC, and Articles L 13B and L 80B of the FPTC
(main administrative guidelines BOI — BIC — BASE — 80, BOI — CF — IOR — 60–50 and BOI — INT — DC — 20–50)
Following a tax reassessment, taxpayers can request mutual agreement procedure (MAP) relief (on the ground of tax treaty or the
European Arbitration Convention) in order to avoid double taxation resulting from the reassessment. Administrative guidelines
(BOI — INT — DG — 20–30) specify the scope and the conditions to be met for the commencement of such a procedure
(e.g., timing, absence of penalties).
Assessment of a transfer pricing documentation penalty under L13 AA (transfer pricing documentation penalty regime)
does not prevent the taxpayer from seeking recourse under MAP provisions.
OECD Guidelines treatment
The French tax authorities consider the French transfer pricing regulations to be consistent with the OECD Guidelines.
There is no specific French transfer pricing-related regulation pertaining to business restructuring (just under certain circumstances
about burden of proof) or attribution of profits to permanent establishments.
Experience in business restructurings shows that tax auditors often consider that a decrease in profit as an indicator of a de facto
transfer of something of value, which should be taxed. In addition, special attention should be paid to restructuring operations
(site closure, lay-off, transfer of on-going concerns etc.). French tax inspectors are also paying more attention to financial transactions
(e.g., loans, guarantees). They are also continuing discussions around intellectual property rights.
Priorities/pricing methods
The tax authorities accept the following methods: CUP, Resale Price, Cost Plus, Profit Split and TNMM; yet tax inspectors usually prefer
the TNMM based on French comparables where the tested party is French.
Transfer pricing penalties
Penalties specific to a failure to comply with the transfer pricing documentation requirement apply, in addition to the fiscal penalties
generally applied as a consequence of a transfer pricing reassessment. Indeed, transfer pricing reassessments from the FTA trigger an
adjustment of the taxable profit for corporate income tax purposes (and other taxes, depending on the case).
Specific transfer pricing penalties are applicable in situations where the taxpayer failed to answer the tax authorities’ request for
documentation, either on the basis of Article L 13B FPTC (which relates to general transfer pricing documentation requirements,
provided the FTA can give evidence of transfer pricing problems before it applies this Article), or on the basis of Articles L 13AA and
L 13AB FPTC (which relate to special transfer pricing documentation requirements):
• Failure to provide complete information in the framework of Article L 13B FPTC may result in:
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