• Service: Tax, Global Transfer Pricing Services, International Tax
  • Type: Regulatory update
  • Date: 12/18/2013

France - Status of transfer pricing proposals in legislation 

December 18:  Part 2 of the draft Finance Bill for 2014 is still under discussion in the French National Assembly, after it was rejected by the Senate in late November 2013.
  • The draft Finance Bill was rejected for the second time by the Senate on 16 December 2014.
  • Final consideration of the draft legislation by the National Assembly is scheduled for 19 December 2014.

Transfer pricing measures

Even though parliamentary consideration of the legislation is still pending, taxpayers need to be aware of the following transfer pricing proposals in the draft bill.

First, one measure would repeal a tax collection deferral mechanism that is usually made available to taxpayers when a procedure for eliminating the double taxation resulting from transfer pricing re-assessment (i.e., MAP case) is opened.

If part 2 of the draft Finance Bill for 2014 were to be enacted as presently drafted, the presentation of a MAP application would no longer result in the suspension of tax collection and payment of the re-assessment for MAP cases opened as from I January 2014. Under the bill, if a MAP case were opened in 2014, French taxpayers would have to pay the amounts of the supplementary corporate income tax and withholding tax resulting from transfer pricing re-assessments.

KPMG observation

The term “procedures opened as from 1 January 2014” is subject to debate and interpretation according to tax professionals with Fidal.*

Based on French tax administrative guidelines, a procedure is “opened” when the French tax authorities acknowledge receipt of a request from the taxpayer. Under this rule, could a postage-return receipt for a taxpayer letter sent by registered mail demonstrate such an acknowledgment by the French tax authorities? It appears that the French tax authorities might not necessarily take this position. Rather, an acknowledgement by the French tax authorities by a separate letter indicating receipt of the request might be sufficient evidence to consider a procedure opened.

Because this position is not settled, prudent taxpayers that have received notices of re-assessments concerning transfer prices, or that have been informed by the tax authorities that they will receive such notices, would consider making a MAP application before 31 December 2013—because this could allow them to use receipt of the postage-return receipt to challenge the tax collection notice.

Penalties changes

The draft Finance Bill provides for penalty changes for taxpayer within the scope of article L 13 AA of the French legal documentation requirements.

The penalties that would apply for a taxpayer’s failure to provide the French tax authorities with complete and accurate transfer pricing documentation within 30 days of a formal notice to do so would no longer be up to 5% of the re-assessment, but would be up to 0.5% of the taxpayer’s turnover.

Transfer of risks and/or functions

The draft Finance Bill 2014 provides that for a transfer of risk(s) / function(s) from a French entity to a foreign related entity, the French company must prove it has benefited from appropriate compensation if its operating results during the two fiscal years (FYs) following the transfer are less (by at least 20%) than the average amount of the operating results derived from the three FYs prior to the change.

If this new provision is enacted, it would apply for FYs ended as from and including 31 December 2013—and represents a shifting of the burden of proof to the taxpayer.

KPMG observation

Companies need to give a particular attention to the documentation of the arm’s length nature of such transfers.


Considering the pending uncertainty regarding the passage of the above provisions, taxpayers may want to consider:

  • Presenting MAP applications before 31 December 2013 for tax re-assessment notices already received and for transfer pricing re-assessments already announced by the French tax authorities—even if not received as yet
  • Reviewing their transfer pricing policy, documentation, and other items that must be in place, or established, in connection with the transfer of risks or functions carried out as from FYs ending 31 December 2013

For more information, contact a tax professional with KPMG’s Global Transfer Pricing Services group (Fidal*) in Paris:

Pascal Luquet

+ 33 1 55 68 15 22

Olivier Kiet

+ 33 1 55 68 1615

Kate Noakes

+ 33 1 55 68 16 57

Xavier Sotillos Jaime

+33 1 55 68 14 85

* Fidal 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.

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