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France: Update of transfer pricing documentation rules


published on 17 January 2018 


Officially adopted on 30 December 2017, the French Finance Act for 2018 adjusts the French transfer pricing documentation requirements to comply with the standards provided by the Organization for Economic Co-operation and Development (OECD) in the Action 13 of its Plan on Base Erosion and Profit Shifting (BEPS).

This new measure is applicable to financial years opened as from 1 January 2018 and its exact terms of application should be detailed in a forthcoming decree. 

Scope of the reform: the complete transfer pricing documentation

Article 107 of the Finance Act only modifies the content of the ”complete” transfer pricing documentation which must be delivered by large enterprises at the opening of a tax audit procedure, upon request from a tax inspector (Article L. 13 AA of the French Tax Procedure Code). The regimes applicable to the French ‘light’ transfer pricing documentation (Article 223 quinquies B of the French tax code) and Country-by-Country Reporting (Article 223 quinquies C) remain unchanged.

Qualify as ”large enterprises” subject to this ”complete” documentation requirement, entities or permanent establishments located in France which satisfy to one of the below criteria:
  1. Have a total net annual turnover or total gross assets exceeding EUR 400 million;
  2. Hold, directly or indirectly, at the closing date of the fiscal year, more than 50% of the shares or voting rights of a legal entity meeting one of the criteria mentioned in 1;
  3. Be, at the closing date of the fiscal year, more than 50% held, directly or indirectly by a legal entity meeting one of the criteria mentioned in 1;
  4. Belong to a French tax consolidated group that includes at least one legal entity meeting one of the criteria mentioned in 1, 2 or 3.

Failure to provide a comprehensive documentation within 30 days from the formal notice of the tax inspector may, for each audited year, trigger a tax penalty amounting to the highest of 0.5% of the volume of undocumented transactions or 5% of the tax adjustments resulting from the transfer pricing reassessment; with a minimum of EUR 10 000 per audited year.


Current regime

Under the current regime, the French complete transfer pricing documentation is organized in three sections:
  • A first section with general information on the group (general description of the activity, legal and operational structures, functions performed and risk assumed by the affiliated parties, list of important intangible assets, and general description of the group’s transfer pricing policy);
  • A second section with specific information related to the audited entity (description of the activity, description of the controlled transactions -including their nature and amount-, list of cost contribution arrangements and copy of advanced pricing agreements and tax rulings, presentation of applied transfer pricing methods and justification of their appropriateness based on an analysis of the functions performed, assets owned and risks assumed by the audited entity; and comparability analysis). 
  • A third section with copies of tax rulings of foreign tax authorities, if any.
    Specific additional information is required for controlled transactions with affiliated parties in non-cooperative States or territories. 


New regime

The Finance Act for 2018 formally transposes the OECD concepts of ”master file” and ”local file”, and their respective content, into French domestic law. It was considered that the current regime no longer complies with international standard.

Indeed, under the new regime, large enterprises subject to the French complete transfer pricing documentation must prepare and deliver if request to do so by a tax inspector:
  • A ”master file” that includes the information listed in Annex I of the OECD final report on BEPS Action 13 (2015), with very minor adjustments (for instance, the transposed version does not expressly require to provide ”a general description of the group’s transfer pricing policies related to R&D and intangibles”).
  • A ”local file” that includes in extenso the information listed in Annex II of the OECD final report on BEPS Action 13 (2015). 


As a result, the information formally required by law is much more detailed than under the current regime.

With respect to the content of the complete transfer pricing documentation, the changes relate essentially to the information which must be provided on intangibles and intercompany financial activities of the group:



In addition to the list of intangibles (already required), large enterprises must now provide:
  • A general description of the group’s overall strategy for the development, ownership and exploitation of intangibles, including location of principal R&D facilities and location of the R&D management;
  • A list of important agreements among identified associated enterprises related to intangibles, including cost contribution arrangements, principal research service agreements and licence agreements; and,
  • A general description of any important transfer of interest in intangibles among associated enterprises during the fiscal year concerned, including the entities, countries, and compensation involved.


Group’s intercompany financial activities

In addition to details on the intercompany financing between group affiliates (already required), large enterprises must now provide information on ”how the group is financed, including important financing arrangements with unrelated lenders” (external financing).

The alignment of the French transfer pricing documentation requirements to the international standard should constitute a simplification for international groups. French companies that do not apply the OECD Model at this time must however comply with the new regime and should be in a position to provide the French Tax Authorities with a transfer pricing documentation consistent with the OECD Model as from financial year 2018 (in practice the documentation will have to be provided in case of tax audit regarding financial year 2018 and following, i.e. as from 2019.

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