Transfer Pricing guide: France

Is the jurisdiction part of OECD/G20 Inclusive Framework on BEPS?

Yes.

Relevant Transfer Pricing regulation

Article 57 of the French General Tax Code (Code général des impôts): legal framework, indirect transfer of profits abroad;
Articles L13AA, L13AB and R13AA-1 of the French Book of Fiscal Procedures (Livre des procédures fiscales): formal TP documentation (Master File and Local File) threshold and requirements;
Article L13B of the French Book of Fiscal Procedures (Livre des procédures fiscales): information to be provided by entities below the threshold;
Article 223 quinquies B of the French General Tax Code (Code général des impôts): annual TP return (Form 2257-SD);
Article 223 quinquies C of the French General Tax Code (Code général des impôts): CbC Report

Is this regulation aligned with the OECD Guidelines

Yes.

Documentation Threshold for Preparation of Local File/ TP Documentation

French entities meeting one of the following conditions must prepare a TP documentation (Master File and Local File):
a) Whose annual turnover excluding taxes or gross assets exceeds or is equal to EUR 150 million (n.b., for fiscal years opened as from 1 January 2024, but EUR 400 million for previous fiscal years);
b) Holding directly or indirectly, at the end of the fiscal year, more than 50% of an entity satisfying the condition mentioned in a);
c) Held directly or indirectly, at the end of the fiscal year, at more than 50% by an entity satisfying the condition mentioned in a); or
d) Belonging to a French consolidation group for tax purposes which includes an entity satisfying the condition mentioned in a).

Documentation Threshold for Preparation of Master File

See above.

Documentation Threshold for Preparation of Country by Country Report

French entities meeting the following conditions:
a) Preparing consolidated accounts;
b) Holding or controlling directly or indirectly one or more entities located abroad, or having branches abroad;
c) Whose annual consolidated turnover excluding taxes exceeds or is equal to EUR 750 million; and
d) Not held by one or more entities located in France and required to file this declaration, or located abroad and required to file a similar declaration under foreign regulations.

Submission of Local File, Master File, and CbC Report Required? If so, when?

The Master File and Local File have to be provided upon request from the French Tax Authorities (in case of a tax audit for instance). For entities that are in the scope of transfer pricing documentation requirements, failure to provide the TP documentation may lead to application of penalties. The TP documentation does not have to be submitted
The CbC Report must be submitted electronically within 12 months following the end of the fiscal year.

If No Submission Required, any Other Deadline?

The Master File and Local File must be provided to the French tax authorities ("FTA") upon request in the context of a tax audit.
If it is not provided, or only partially, the FTA will issue a formal notice to provide or complete the TP documentation within 30 days.
The taxpayer may request in writing an extension of this period, specifying the reason and duration (1 additional month maximum), but the FTA is not obliged to grant it.

Other Documentation Requirements

French entities meeting one of the following conditions must prepare and submit electronically an annual TP return (Form 2257-SD):
a) Whose annual turnover excluding taxes or gross assets exceeds or is equal to EUR 50 million;
b) Holding directly or indirectly, at the end of the fiscal year, more than 50% of an entity satisfying the condition mentioned in a);
c) Held directly or indirectly, at the end of the fiscal year, at more than 50% by an entity satisfying the condition mentioned in a); or
d) Belonging to a French consolidation group for tax purposes which includes an entity satisfying the condition mentioned in a).

Does TP documentation / Local file Need to be Prepared Contemporaneously with Tax Return Filing (i.e., before filing the return)?

The TP documentation needs to be contemporaneous and prepared annually under local regulations. The Master File and Local File should be ready at the time of filing the CIT return (i.e., 3 months after the end of the fiscal year, or early May for company closing on 31 December).

Preparation of TP Return Required?

Yes.

Deadline for TP Return Filing

The Form 2257-SD must be submitted electronically within 6 months following the deadline to file the CIT return (i.e., 3 months after the end of the fiscal year, or early May for company closing on 31 December). For companies closing on 31 December, the deadline to submit the TP return is therefore generally early November.

Key information to be included in the TP Return

The Form 2257-SD includes general information about the group (activity, main intangible assets, transfer pricing policy, changes that occurred during the fiscal year) as well as specific information regarding the French entity, notably a summary of its intragroup transactions exceeding EUR 100,000 when aggregated by nature and the main transfer pricing method applied by nature of transaction. Intercompany flows between a head office and a permanent establishment are also within the scope.
As an exception, French entities which do not carry out any transactions with related parties located abroad, or which carry out transactions with related parties located abroad but for less than EUR 100,000 by nature of transaction, do not have to submit this TP return.

Local vs Regional Comparables Set

French comparables are preferred when the tested party is French, but pan-European comparables are generally accepted.

Single-Year vs Multi-Year Analysis

Multiple-year testing (three-year weighted average) is preferred.

Public vs Private Comparables

Public data are in general required (private data in exceptional cases)

Interquartile Range or Full Range

Interquartile Range is preferred.

Transaction-Based or Aggregate Approach, or Both

There is no specific guidance, but a transaction-based approach is generally preferred especially since the introduction of rules derived from Action 13 of the BEPS project.

How Often are Benchmarking Sets Renewed (financial update versus full scope BMS preparation)

Benchmarking studies can generally be used during 3 years provided the conditions remain the same. However, it may be necessary to proceed with an update of the financial data of the benchmarking study every year.

In Case of Delayed Submission of Documentation

Failure to respond or a partial response to the formal notice from the FTA to provide or complete the TP documentation will result in the application, for each audited fiscal year, of a penalty that may reach the higher of the following two amounts, depending on the seriousness of the breaches: 0.5% of the amount of the transactions or 5% of the TP reassessments. The amount of the penalty may not be less than EUR 50,000 per year (EUR 10,000 before 2024).

Failure to submit the CbC Report within the deadline will result in the application of a fine which may not exceed EUR 100,000.

Failure to submit the Form 2257-SD within the deadline will result in the application of a EUR 150 fine. A fine of EUR 15 per omission or inaccuracy within the declaration also applies (the amount of the fine may not be less than EUR 60 or more than EUR 10,000).

In case of Income Adjustments in Course of a Tax audit

It is not unusual that penalties for deliberate offense (40%) are applied in the course of tax audits related to TP matters. In extreme cases, penalties for abuse of law or fraudulent manoeuvres (80%) can be applied.

In addition, a TP reassessment may be qualified as a deemed distribution triggering the application of a withholding tax (depending on the applicable double tax treaty, the amount of the withholding tax can be reduced). In such case, a 10% penalty applies on the withholding tax that should have been paid.

APA & MAP Availability

Unilateral, bilateral and multilateral APA procedures are available in France.
MAPs may be available based on (i) double taxation treaties signed by France (n.b., France opted for the arbitration provisions in the MLI), (ii) the European Arbitration Convention (90/436/EEC) or (iii) the Directive (EU) 2017/1852.
A "Charter applicable to relations between the company and the DGFiP in the context of a request for an APA" has been published in April 2025.

Applicability of Safe Harbour Rules

There are no safe harbour rules enclosed in French tax law.

Critical Transfer Pricing Issues Prevailing in the Jurisdiction, if any

Certain topics are subject of particular attention from the FTA, such as transfer pricing for management fees, transfer of intangible assets and reorganization of business, financial transactions.

Criteria/ Guidelines for Transfer Pricing Audit/ Assessments by Tax Authority

TP audits are always conducted as part of a broader tax audit. The TP documentation is almost always requested by the FTA and, even for entities which are below the formal TP documentation threshold, a "light" TP documentation can be requested by the FTA in the context of a tax audit.

Indicators that may lead to further investigation include, for example, loss-making French entities, transactions with related parties located in low-tax jurisdictions, and large variations in transaction amounts.

Relevant Regulations and Rulings with Respect to Thin Capitalization or Debt Capacity in the Jurisdiction

French tax law includes various provisions related to deduction of interest (in particular to meet the provisions of the ATAD directive) as well as thin capitalisation rules.