When a French company carries out transactions with related companies located abroad, the prices charged (“transfer pricing”) must be in line with those charged between unrelated companies.

In order to facilitate the French tax administration’s control over transfer pricing, the legislator imposes specific documentary and declarative obligations on multinational groups.

There are varying levels of obligations:
– For large groups (turnover or gross assets on the balance sheet exceeding € 400 M ):
Obligation to make available a complete transfer pricing documentation at the first request of the French Tax Authorities (LPF Art. 13 AA);
Annual submission of a “simplified documentation” on the transfer pricing policy (form n° 2257-SD – CGI Art. 223 quinquies B).
– For other groups :
Within the framework of an accounting verification, the provision, within 2 months, of a full documentation on the transfer pricing policy (LPF art. L 13 B) ;
2017 new obligation: Annual submission of a “simplified documentation” on the transfer pricing policy (form n° 2257-SD – CGI Art. 223 quinquies B).

To date, under French law, a simplified yearly declaration about transfer pricing (Form n° 2257) is required from French entities, with turnover or gross assets on the balance sheet exceeding € 400 M.

The French law n° 2016-1691 of December 9, 2016 on transparency (so-called “SAPIN II”) provided for a reduced threshold of 50 M € of turnover or gross assets.

From now, this obligation concerns:
– French entities, with turnover or gross assets on the balance sheet exceeding € 50 M ;
– French entities holding, directly or indirectly, more than 50% of the capital or voting rights in a legal person having such turnover or gross assets or which are more than 50% held, directly or indirectly, by such legal person;
– French entities which belong to a French tax consolidated group that includes at least a legal entity that meets one or more of the aforementioned criteria.

Even small and medium enterprises (SMEs) are now subject to this yearly transfer pricing declaration.

This new duty will be effective for accounting periods closing on or after December the 31st 2016.

Practically, entities which are closing their accounting periods on 31 December 2016, will have to subscribe the declaration 2257 no later than November the 3rd, 2017.

Writting article by Me Aurelie BOURY