Small-sized, medium-sized companies: Transfer pricing form’s threshold lowered

Middle-market companies and SMEs have until November 3, to fill in the transfer pricing form following the lowering of the applicable threshold to €50 million.

The applicable threshold for the transfer pricing form (2257-SD form) has been lowered to €50 million of annual pre-tax turnover or total gross assets on the balance sheet as from fiscal years ended December 31, 2016. This threshold was previously set at €400 million.

This requirement directly impacts SMEs and middle-market companies, since it affects legal entities established in France and reaching this new threshold, as well as legal entities owned or holding – directly or indirectly – over half of the capital or voting rights of a legal entity fulfilling the new threshold conditions. Similarly, this obligation applies to legal entities members of a tax group if one of the companies meets the above criteria.

According to this new requirement – resulting from the law of December 9, 2016, related to transparency, fight against corruption and modernization of economic life modifying Article 223 quinquies B of the French General Tax Code – the legal entities subject to the above mentioned threshold must electronically submit within six months of the filing of their tax return, a form (CERFA 2257-SD) detailing their main intragroup flows. For fiscal years ending December 31, 2016, the deadline for the filing is November 3, 2017. Thus, there is not much time left to be prepared.

This new legislation confirms that transfer pricing policies applied within groups, regardless of their size, are particularly scrutinized by the French Tax Authorities. Therefore, groups need to strengthen their transfer pricing process in order to be able to demonstrate the arm’s length nature of their policies in the event of tax audits.

In practice, the transfer pricing issue is raised as soon as international intragroup transactions exist, without any materiality threshold. The lack of structuring and documentation of intragroup policy sometimes unfortunately leads to easily avoidable adjustments.

Grégoire de Vogüé

Grégoire de Vogüé, Partner, heads the Transfer Pricing team. He has acquired more than 14 years in all transfer pricing issues and corporate strategy. His multidisciplinary skills combined with his […]