The transfer pricing policy purpose is to justify the arm’s length nature of the pricing policy for transactions between companies belonging to the same group and established, at least in part, outside France.
A. Who is affected by the annual declaration or transfer pricing documentation?
This reporting obligation applies to French legal entities as well as to foreign company’s establishments/branches in France in one of the following situations: (see attached document)
B. In a nutshell: what are we talking about?
1. Annual declaration of intra-group transactions The annual transfer pricing declaration (form 2257-SD) must be filed online within six months of the corporation tax return filing deadline (i.e., by 3 November 2023 at the latest, for companies closing their financial year at the end of the year).
Transactions (e.g., provision of services and supply of goods) with group companies established outside France that exceed € 100,000 (cumulative amount) per type of transaction and per year must be declared. This applies in particular to financial flows (interest on loans and shareholders’ advances), intra-group services known as "management fees", royalties and patents, etc.
The threshold for this declaration is currently set at €50m.
Failure to file the declaration will result in a fine of €150. Omissions or inaccuracies in the declaration are subject to a fine of €15 per omission or inaccuracy, with the total fine not being less than €60 or more than €10,000.
2. Full transfer pricing documenta$on
Full transfer pricing documentation must cover all intra-group transactions between related companies, including transactions between a head office and its branch, and must be made available to the tax authorities in the event of an audit of the accounts for all the audited financial years.
This documentation must be updated every year.
Companies exceeding the €400 million threshold are subject to this documentary obligation under the conditions set out above (A).
If this documentation is not provided within 30 days of the French tax administration's request, the administration is liable to a fine equal to the higher of the following amounts:
1. 0.5% of the amount of the transactions covered by the documentation that has not been made available to the French tax administration; or
2. 5% of the tax adjustments relating to the transactions covered by the documentation. However, this fine may not be less than €10,000 per year.