The documentary obligation in France (globally) complies with BEPS recommendations

OECD recommendations on transfer pricing documentation were made public in the Action 13 report in November 2015. These recommendations are intended to clarify the information and level of detail to be presented to administrations. In order to enter national law, they must be introduced into the legislation of each State. The Government has prepared the provisions that should be included in the finance laws at the end of this year.

Since January 1, 2010, the French Tax Code specifies the information required by auditors to review the transfer pricing policies implemented within the groups. Article L. 13AA of the French Tax Procedure Code details the documents that must be presented, as soon as the audit begins, distinguishing between information on the group (the master file) and on the audited company (the entity file). The introduction of this requirement clarified the information expected by the auditors and enabled groups to prepare these documents prior to the audit. France thus complied with OECD recommendations and the suggestions of the Joint Transfer Pricing Forum (JTPF) in its 2005 report.

While respecting this distinction, BEPS’s recommendations detailed the information to be included in these group presentation reports, their international transactions and the methods used to determine their price. The first versions of the amendments to this Article L. 13 AA, as disclosed by the DGFiP, led to a walk-away from OECD recommendations by increasing the level of detail and adding to the required information. These additions to the article involved more complex documentation to prepare. They also led to a shift from the standard accepted by OECD countries and thus to depart from the stated objective of documentation compatible with the greatest number of States (as also recommended by the JTPF at the time).

The latest versions of the draft text finally lead to widespread compliance with the recommendations of the OECD report under BEPS Action 13, although some specificities may remain. For the record, the noteworthy additions that could be made by this amendment to Article L. 13 AA of the FTPC are related to the listing and main characteristics of the agreements obtained from the tax authorities, the presentation of the supply chain of the 5 main transactions of goods or services sold by the company, the description of the reorganisations and asset disposals that took place within the group, the details of the mode of financing of the activity, and the addition of a copy of the transfer pricing agreements obtained by the group and relating to the transactions in which the company participates.

Finally, it should be noted that these new obligations would apply for fiscal years beginning on or after January 1, 2018. The groups would have one year to comply with these new standards.

Eric Lesprit

Eric has more than 25 years’ experience in transfer pricing and international tax. He held various senior positions at the French Tax Administration in relation to tax audit, tax policy […]