Global

Details

  • Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 12/31/2013

France - Transfer pricing provisions enacted in Finance Bill 2014  

December 31: The Finance Bill for 2014 (published 30 December 2013) contains transfer pricing provisions, but certain controversial provisions were “censured”—i.e., rejected as unconstitutional—by the Constitutional Court (Conseil Constitutionnel).

Overview

In brief, the transfer pricing provisions in the Finance Bill for 2014 include:


  • A limit on the tax deductibility of interest on related-party loans (i.e., interest is not deductible in situations when the tax, at the lender level, is not equal to a minimum of 25% of the amount of corporate income tax that would have been due in France under ordinary circumstances)


  • A requirement for mandatory supply of “analytical accounts” to the French tax authorities during a tax audit (1) if the taxpayer has total gross assets of at least €400 million, or (2) if the taxpayer’s turnover exceeds a threshold amount of €152.4 million and the taxpayer’s main activity is selling goods, or turnover of €76.2 million for other taxpayers


  • A requirement for mandatory supply of “consolidated accounts” to the French tax authorities during a tax audit of certain taxpayers (e.g., commercial companies subject to the consolidated account rules under the French Commercial Code)


  • Repeal of a provision automatically staying the collection of tax when a French taxpayer files a mutual procedure agreement (MAP) case (the automatic postponement of tax collection continues to apply for MAP cases prior to 1 January 2014)

Rejected provisions

Among the provisions rejected as “unconstitutional” by the French Constitutional Counsel are the following transfer pricing-related measures:


  • An increased penalty of 0.5% based on the taxpayer’s turnover in situations when the taxpayer fails to provide the tax inspector with a “compliant” transfer pricing documentation report (thus, the penalty remains at 5% of the re-assessed amount)


  • A provision requiring “compulsory remuneration” for the transfer of risk(s) or function(s) that stem from a French entity’s transfers to a foreign related entity (no burden of proof for the French company that it 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)

KPMG observation

The French government is reported to be modifying the regulations that concern tax fraud and transfers of benefits abroad, and it is anticipated that further reinforcement measures could be specifically added by new law.



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 16 15


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.




©2013 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

 

Share this

Share this

Subscribe

Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)


Already a Subscriber? Login


Not a member? Subscribe now