• Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/16/2013

France - Transfer pricing documentation automatic under pending legislation 

September 16: A draft law to counter tax evasion (introduced in April 2013) is currently being considered by the French National Assembly (Assemblee nationale) and is at the “second reading” legislative stage.

The pending legislation includes:

  • A measure requiring certain companies satisfying a threshold turnover or gross assets value to provide the tax administration with transfer pricing documentation automatically (not simply during a tax audit)
  • A provision intended to broaden the scope of the “abuse of law” provisions
  • A new regime regarding “back margins”

Transfer pricing documentation

One provision in the pending legislation would require certain companies—those with turnover or gross assets exceeding €400 million—automatically to provide the French tax administration with documentation containing a description of the taxpayer’s transfer pricing policy.

Under current rules, transfer pricing documentation is only required to be provided during the course of a tax audit.

Under the pending legislation, the required provision of a company’s transfer pricing documentation would be made within six months following the due date for filing an income tax return.

Accordingly, if enacted, the provision would be effective and would require transfer pricing documentation to be provided automatically to the tax administration within a six-month period following the first due date for filing income tax returns that comes after the date of enactment.

Abuse of law

The definition of the term “abuse of law” would be broadened under the legislation to provide that the “abuse of law” rule would apply to transactions that were “essentially” entered into for tax purposes.

This provision would apply with respect to reassessment proposals notified as from 1 January 2014.

New regime regarding “back margins”

Another provision in the pending legislation provides that when a French company subject to corporate income tax (1) operates a retail establishment established in France and (2) holds, directly or indirectly, shares in a foreign company, the royalties paid by its goods supplier to the foreign company would be taxable in France.

This measure would apply whether or not the royalties were paid by a supplier established in France or by a foreign affiliated company.

This provision is aimed at addressing a perceived tax evasion when “back margins” are received by some foreign-based purchasing organizations.

KPMG observation

Tax professionals in France have observed that there could be a question as to whether this “back margins” provision would be compatible with EU law.

For more information, contact a tax professional French KPMG tax center in New York or with Fidal Direction Internationale* in Paris:

Gilles Galinier-Warrain, French Tax Center, KPMG LLP, New York

+1 212-954-8605

Olivier Ferrari, Tax Partner

+33 (0)1 55 68 14 76

Patrick Seroin, Tax Partner

+33 (0)1 55 68 15 93

*Fidal Direction International is a French law firm that is independent from KPMG and its member firms.

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