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France Transfer Pricing Guide

the French transfer pricing rules (prix de transfert). The guide covers: the arm's length principle — France applies the OECD arm's length principle under Article 57 of the CGI: transactions between related companies must be at prices that would have been agreed between independent companies in comparable circumstances; the French tax authorities (DGFiP) scrutinise the pricing of transactions between French companies and their foreign related parties (the "entreprises associées"); the transfer pricing documentation obligations — French companies that meet certain thresholds must prepare and maintain transfer pricing documentation (the "documentation sur les prix de transfert"); the thresholds for the documentation obligation (applicable since 2020): (a) the company's annual turnover exceeds €400 million, OR (b) the company's gross book value of assets exceeds €400 million, OR (c) the company holds at least 50% of a company that meets the threshold, OR the company is held at 50% or more by a company that meets the threshold; the content of the documentation — the French transfer pricing documentation follows the OECD three-tier approach: (a) the "master file" — the overview of the group's business (the organisational structure, the value chain, the intangible assets, the financing arrangements, the group's transfer pricing policies), (b) the "local file" — the detailed analysis of the French company's transactions (the description of the controlled transactions, the functional analysis, the comparability analysis, the selection of the transfer pricing method, the application of the arm's length price), (c) the "country-by-country report" (the "déclaration pays par pays" — the CbCR) — the annual report for groups with consolidated turnover above €750 million, filed with the French tax authorities within 12 months of the end of the fiscal year; the penalties for non-compliance — the failure to prepare or provide the transfer pricing documentation on request (within 30 days of the DGFiP's request) can result in a penalty of up to 5% of the value of the undocumented transaction (the "amende pour défaut de documentation") or up to 0.5% of the annual turnover; the penalty for a transfer pricing adjustment (the "rehaussement") — the reassessment of the tax due plus interest at 0.20% per month, plus the penalty of 40% if the DGFiP proves that the transaction was deliberately mispriced (the "majoration pour manquement délibéré"); the advance pricing agreement (APA) procedure — the "accord préalable en matière de prix de transfert" (the "APAT" — the "agreement on transfer pricing"): the taxpayer can request the DGFiP to agree on the transfer pricing methodology for future transactions; the APA is binding on the tax authorities for a fixed period (typically 3–5 years); the APA can be unilateral (with the French tax authorities only) or bilateral (with the tax authorities of both countries); the specific transfer pricing issues for France — (a) the "margin method" (the "méthode du prix de revente" or the "méthode du coût majoré" — the "cost plus" method) is commonly used for intragroup services, (b) the "profit split method" (the "méthode de partage des bénéfices") is used for integrated group operations, (c) the "TNMM" (the "méthode transactionnelle de la marge nette" — the transactional net margin method) is commonly used for distributors and manufacturers, (d) the "intragroup services" — the services provided by a parent company to its subsidiaries (management, IT, HR, finance) must be priced at cost plus a profit margin (the "cost plus mark-up" — typically 5–15%).

France strictly enforces the transfer pricing rules, and the penalties for non-compliance are significant. All amounts in Euros (EUR). For related reading, see our Corporate Tax Guide → and Cross-Border Tax Guide →.

Documentation Thresholds

• €400 million: A French company must maintain transfer pricing documentation if its annual turnover or gross assets exceed €400 million. The obligation also applies if the company is held at 50%+ by a company that meets the threshold, or if the company holds a 50%+ stake in a company that meets the threshold.

Penalties

• 5% of transaction value: The failure to provide the transfer pricing documentation within 30 days of the DGFiP's request can result in a penalty of up to 5% of the value of the undocumented transaction, or 0.5% of the annual turnover. A deliberate mispricing can result in a 40% penalty on the reassessed tax.

For the APA procedure and the bilateral agreements, see the DGFiP's "Prix de transfert" page. For the CbCR filing requirements, see the OECD's country-by-country reporting portal.