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Retail e-briefing France: Potential changes to transfer pricing rules

    • Retail - E-briefings

    10-07-2013

    Retail businesses which have operations in France may need to review their pricing arrangements and how they calculate profits subject to tax in France. Also, the records they are required to maintain.

    Following a report dated 6 June 2013 issued by the French Tax Authorities, the French Government has announced its intention to amend the transfer pricing legislation to challenge perceived avoidance by international businesses with operations in France.
     
    The report recommends:

    • reversing the burden of proof on the taxpayer in group reorganisations, relationships with companies located in tax havens, companies having recurring deficits or negative net margins where pricing structures are more likely to be artificial and such structures have tax avoidance motives;
    • modifying the penalty computation if the transfer pricing documentation is not compliant with the French tax regulations so that the computation of the tax penalties is based on the value of transactions rather than on the proposed tax adjustments;
    • improving the data access for the French Tax Authorities by enforcing the obligation for companies to provide access to their analytical accounting in digital form so that the French Tax Authorities can see the transfer pricing policy applied within the group and with non-related parties;
    • encouraging the use of methodologies to determine local French profits which improve the taxation of  profits in France; and
    • amending the procedure which allows a deferment of payment of the tax assessed at the time of the opening of a mutual agreement procedure to encourage the continuation of the discussions between the taxpayer and the French Tax Authorities and speedier resolution of disputes.

    If such proposals are implemented in France, this would lead to significant changes in the French transfer pricing legislation which would create significant compliance burdens for all international retail businesses that perform activities in France.

    For more information, please speak to our tax team in Paris.