France

TP country guide

Grégoire de Vogüé and Aymeric Nouaille-Degorce of Taj, a Deloitte network entity, highlight the key TP developments in France over the past year.

Market overview

France is a known leader in tax policy and the government has already adopted most of the BEPS measures proposed by the OECD into domestic law.

A new law announced on December 9 2016, outlines the reduced threshold for taxpayers eligible to file the annual specific form known as the 'abridged' transfer pricing form. The threshold of €400 million revenue was reduced to €50 million.

Tax professionals believe the current threshold could continue to decrease in the next few years, which would lead to an increasing number of corporations obligated to fulfil documentation requirements.

"This is clearly an area of concern for clients," said Guillaume Valois, a partner from DLA Piper. "They want to be advised regarding their filing obligations and their compliance obligations, but they also want to revise, review and reorganise their tax strategy in order to be compliant and also remain tax efficient given the new set of rules."

Current documentation requirements that the French government demands of large multinational groups are: the filing of an annual specific transfer pricing form (Form 2257) where corporations must detail information on group activity, intangibles, TP methods and intra-group flows; keeping up to date with regards to transfer pricing documentation (master file and local file) and the submission of country-by-country reports (CbCR).

"Country-by-country reporting is important for our clients," said Antoine Vergnat, Mcdermott Will & Emery. "They would have to report to the jurisdictions where they are established, including their activity, profits and employees."

"It gives us opportunities to increase the scope of our work, due to more compliance and more scrutiny, our clients rely on us to advise them on future changes," he added.

Increased transparency

Jan Martens, a transfer pricing partner at EY, said: "This year is the first year the tax authorities have the authority to request face-to-face meetings with either clients, or suppliers, or anyone who they think is of interest in relation to the taxpayer."

"On the client side, more are asking 'is my transfer pricing BEPS compliant?' because it has become a greyer area than it used to be. One client said that they did not think they were doing anything wrong, but after they saw what was going on around them, they were not too sure any more," Martens said. "When analysing TP risk, the reputational risk is taken into consideration now, that is definitely something that is very recent," he added.

In line with the theme of increased transparency, Caroline Silberztein, chair of Baker McKenzie's global TP practice group, said: "There is a lot of political pressure to comply with BEPS documentation."

She agreed with her peers that clients were feeling increasingly fearful of transfer pricing audits, which she said were becoming more common.

However, contrary to the theme of increased transparency, the French Constitutional Courts ruled against making CbCR available to the public on December 8 2016, declaring the action unconstitutional.

But, The European Parliament adopted the directive on public CbCR into European Law in July 2017. This overruled the French decision on CbCR and this will be implemented into French law. CbCR-compliant companies should anticipate providing figures on their global profit and tax data in their annual reports.


Tax authorities

Ministry for the Economy and Finance
Télédoc 151
139, rue de Bercy
75572 Paris Cedex 12
Tel: +33 1 40 04 04 04
Website: www.economie.gouv.fr


Tax rates at a glance

(As of July 2017)

Corporate income tax 33⅓%(a)
Capital gains tax 0/15/33⅓% (a)
Branch tax rate 33⅓/30%
 
Withholding tax
Dividends 30% (b)(c)(e)
Interest 0% (b)(e)(f)
Royalties 33⅓ (b)(e)(f)
 
Net operating losses (years)
Carryback 1 (h)
Carryforward Unlimited (i)

  1. For resident companies, surtaxes are imposed on the corporate income tax and capital gains tax.
  2. These are the withholding tax rates under French domestic law. Tax treaties may reduce or eliminate the withholding taxes.
  3. Under the European Union (EU) Parent-Subsidiary Directive, dividends distributed by a French subsidiary to an EU parent company are exempt from withholding tax, if, among other conditions, the recipient holds or commits to hold at least 10% of the subsidiary's shares for at least two years.
  4. The withholding tax rate is 75% for distributed profits paid into uncooperative states.
  5. No withholding tax is imposed on interest and royalties paid between associated companies of different EU member states if certain conditions are met.
  6. The withholding tax rate is 75% for interest on qualifying borrowings and royalties paid into uncooperative states.
  7. Branch remittance tax may be reduced or eliminated by double tax treaties. It is not imposed on French branches of companies that are resident in EU member states and are subject to tax in their home countries.
  8. Losses carried back may not exceed €1 million.
  9. The amount of losses used in a given year may not exceed €1 million plus 50% of the taxable profit exceeding this limit for such year.

Source: EY and Deloitte


Firm contact details

Taj, Société d'Avocats (Deloitte)