France: Plan to strengthen transfer pricing audits and combat public finance fraud
The French government has introduced a comprehensive plan to combat public finance fraud, with a particular focus on transfer pricing. These initiatives have been designed to combat fraud, enhance compliance, and ensure fair taxation practices. The plan encompasses three main measures:
- Lowering the turnover threshold: Currently, companies are required to provide transfer pricing documentation to the French tax authorities during a tax audit if their turnover exceeds 400 million euros. The proposed change would significantly reduce this threshold to 150 million euros, expanding the scope of companies obliged to furnish transfer pricing documentation.
- Shifting the burden of proof: Under existing regulations, the burden of proof lies with tax authorities to demonstrate any advantages granted to other companies within the group. The new rules would place the burden on the company itself to prove compliance with the arm’s length principle and show that no undue advantages were provided in intra-group transactions. Additionally, penalties for non-compliance with documentation requirements would be heightened.
- Extending the statute of limitations: Transactions involving hard-to-value intangible assets would see an extension in the statute of limitations beyond the usual three-year period. The specific duration of this extension has not been determined yet but is anticipated to range between four and ten years.
These measures are anticipated to be included in the upcoming finance bill for 2024. The objective is to reinforce oversight, foster meticulous transfer pricing documentation practices, and ensure alignment between documented transactions and actual intra-group activities.
Source: economie.gouv.fr
