News on transfer pricing obligations in France: towards documentation for all

Two major changes in filing obligations are to be noted:

  • The threshold above which a taxpayer should file the transfer pricing return(formulaire 2257 SD, Article 223 quinquies B du CGI) is decreased from €400 million to €50 million, subjecting many SMEs to the filing obligation. The form must be filed within six months following the tax return’s filing.
  • The country by country reporting (formulaire 2258-SD, Article 223 quinquies C du CGI), should be submitted by the parent company within 12 months following the closing of the taxpayer’s accounts. It only concerns groups with a consolidated turnover in excess of €750 million. Moreover, it must be noted that a part of this document (table 3) has to be filed in English. The first deadline for 2016 is December 31st, 2017.

If we take into consideration the ongoing discussions of the European Union on lowering the country-by-country reporting threshold and making it public, we are witnessing the emergence of true “transfer pricing democratization” that may impact all companies that operate internationally. This also raises the difficult issue of the preparation of SMEs to potential questions from tax authorities. Even without a strict documentation obligation, tax authorities may question groups’ transfer pricing policy, with potentially serious financial consequences. You can observe it in practice with tax audits that are ever more transfer pricing focused, even on small structures.