The requirement to file the abridged transfer pricing documentation annually applies to “large” legal entities established in France and subject to the French documentation requirements under Article L13AA of the French tax procedure code—that is, entities that satisfy one of the following requirements:
- Having an annual turnover or gross assets of €400 million or more
- Being directly or indirectly owned for more of 50% of their share capital/voting rights by a legal entity (French of foreign) meeting the €400 million turnover or gross assets threshold
- Directly or indirectly owning more than 50% of the share capital or voting rights in a legal entity (French or foreign) meeting the €400 million turnover or gross assets threshold
- Belonging to a French consolidated group including a company falling within the scope of Article L13AA
Contents of the annual transfer pricing information return
The annual transfer pricing information return, under the new law, consists of an “abridged” version of existing transfer pricing documentation that large taxpayers would have to present during a tax audit.
The information and documents to be filed annually with the French tax authorities are summarized in the table below:
Documentation requirement in tax audit
New “abridged” annual filing
|General information on the group of associated enterprises|
|A general description of the activity engaged in, including any changes that occurred during the FY
|A general description of the legal and operational group structure, and the entities involved in the intra-group transactions with the French taxpayer need to be identified
|A general description of the functions performed and risks assumed by group entities that transact with the audited company
|A list of the main intangible assets owned, particularly patents, trademarks, trade names and know-how, related to the French enterprise
|A general description of the group’s transfer pricing policy
||Yes, including any changes made during the FY|
|Specific information on the associated French entity|
|A description of the activity engaged in, including any changes that occurred during the FY
|A description of intragroup transactions, including the nature and the amount of transactions (including royalties)
||Yes, in the form of a summary but only when the aggregate amount per transaction type exceeds €100,000|
|A list of cost sharing agreements, a copy of advanced pricing agreements (APAs) and any tax rulings dealing with transfer price determinations
|A presentation of the transfer pricing method(s) applied to determine the transfer prices in accordance with the arm’s length principle
||Yes, with an analysis of the functions performed, the assets used and the risks assumed, as well as an explanation concerning the selection and the application of the method(s) retained
||Yes, but limited to the indication of the main method used and any changes that occurred during the FY|
|When relevant, an analysis of comparable transactions and/or companies
Annual submission deadline
These documents and information must be submitted to the French tax administration within six months of the date of the tax return filing (in practice this is within nine months of the end of the fiscal year or 10 months for enterprises with fiscal years ending on 31 December).
This requirement applies for taxpayers whose tax return filing deadline falls after the law’s date of enactment—i.e., 8 December 2013. In other words, taxpayers with a fiscal year ending as from 30 September 2013 are within the scope of the new filing obligation.
In practice, for FY ending 31 December 2013, the reporting requirement must be satisfied within the six months following the tax return filing deadline (5 May 2014)—or before 5 November 2014.
No specific penalty for a breach of the information reporting/documentation requirement is provided in the new law. As such, any failure in the reporting requirement could be subject to a general penalty of €150, and inaccuracies or omissions subject to a €15 penalty per inaccuracy or omission (with a minimum penalty of €60 and a maximum up to €10,000).
In any event, the failure to file the required information return is likely to attract the attention of the French tax authorities.
It is expected that the French tax administration will soon issue comments and guidance (in the form of an Information Note) on the practical arrangements for submitting the information (i.e., electronically or by paper).
In order to prepare to meet the new obligation, taxpayers may want to consider (1) adding this requirement to the key tax compliance actions for 2014; (2) reviewing their transfer pricing policy, documentation, and other supporting information currently in place or needing to be established; and (3) assessing potential changes to the tax risk profile and their implications.
For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group (Fidal*) in Paris:
Pascal Luquet, Partner
+ 33 1 55 68 15 22
Olivier Kiet, Partner
+ 33 1 55 68 1615
Kate Noakes, Partner
+ 33 1 55 68 16 57
Xavier Sotillos Jaime, Director
+33 1 55 68 14 85
* Fidal Internationale is an independent legal entity that is separate from KPMG International and its member firms.
Or contact a tax professional with KPMG's Global Transfer Pricing Services.