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Transfer prices, as defined by the OECD, are “the prices at which a business transfers tangible goods, intangible assets, or provides services to associated businesses“, i.e. the prices of transactions between companies belonging to the same group and established in different states

1. Companies are required to set up a summary report on their transfer pricing, if:

  • their annual revenue (excluding VAT) or balance sheet (gross assets) exceeds M€50;
  • at the end of the financial year, they directly or indirectly hold more than 50% of the share capital or voting rights of a company, or are held by a company having reached one of the above thresholds;
  • they belong to a tax consolidation group in which one of the companies meets the first criterion above.

This transfer pricing report must include cash flows exceeding €100,000 with foreign related parties (purchases, sales, services, fees, etc.).

The penalties for non-performance are as follows:

  • Failure to file the tax return: €150
  • Fine of €15 per error or omission
    • The minimum fine is €60. The maximum fine is €10,000.

2. Report to be provided in the event of an accounting audit (Article L.13 AA of the Tax Procedures Guide):

  • Companies must file a report with the French Tax Authorities if their annual revenue (excluding VAT) or balance sheet (gross assets) exceeds M€400
    • This report must also be filed if a company is controlled by or controls a company having reached this threshold, whatever the company’s size;
    • The report is comprised of two parts:
      • Master File: providing an overview of the group’s organization
      • Local File: providing information to enable to assess the arm’s length nature of the cross-border intercompany transactions of the company concerned.

The penalties for non-performance are as follows:

  • Report lacking or incomplete : minimum fine of €10,000 and up to:
    • 0.5% of the amount of the transactions for which a report is lacking or incomplete;
    • 5% of the transfer pricing tax reassessment concerning the transactions for which a report is lacking or incomplete

3. Country by Country Reporting (CbCR) is required for companies belonging to a consolidated group of companies whose annual revenue (excluding VAT) exceeds M€750

  • A single report must be filed for all the companies concerned.
    • In practice, the CbCR is filed by the parent company, but it can also be filed by a company designated for that purpose.
  • The company filing the CbCR must also file a corporation tax return (Form 2065-SD)
  • The report contains various data, including the revenue, profit, taxes, headcount, etc. of each company in the group
  • A fine of €100,000 is applicable if the report is not filed