New French finance law adopts country-by-country reporting Tax Insights

Tax Insights
from Transfer Pricing
New French finance law adopts
country-by-country reporting
February 2, 2016
In brief
The new French Finance Law for 2016 adopted the new OECD country-by-country (CbC) reporting
obligations relating to Action 13 of the OECD’s Base Erosion and Profit Shifting (BEPS) initiatives (article
223 quinquies C of the French Tax Code). This measure will be effective for fiscal years that begin on or
after January 1, 2016.
The new law also included some specific measures defining the way the French transfer pricing
declaration should be submitted with respect to forms to be filed as from January 1, 2016.
In detail
Contents of the new
requirements
CbC reporting
Under the new French law,
some taxpayers must submit a
CbC report including group
revenues, financial accounting
and tax ratios, nature of the
main business activities, and
jurisdictions where all the group
entities are tax resident. This
CbC report must be submitted
online within 12 months after
the end of the group’s financial
year.
This obligation applies to
French resident companies that
cumulatively:
 draw up consolidated
accounts,
 own foreign branches or
control, directly or indirectly,
one or more foreign-based
subsidiaries,
 generate annual consolidated
excluding-tax turnover of at
least EUR 750 million, and
 are not held by one or several
legal entities established in
France already subject to the
French CbC reporting
requirement, or by legal
entities established abroad
that are subject to similar
CbC reporting requirements
pursuant to foreign
legislation.
The French government will
publish a list of States or
territories that have
implemented a similar CbC
reporting requirement, have
concluded an automatic
exchange of information
agreement with France, and
comply with this agreement.
Entities established in France
also are subject to the French
CbC reporting requirement
when the French entity is held,
directly or indirectly, by a legal
entity established in a foreign
State or territory not included in
the above-mentioned list and
that would have been subject to
the CbC reporting requirement
if established in France, in the
following situations:
 The French entity has been
appointed by the group to
submit the report.
 The French entity cannot
demonstrate that another
entity, based in France or in
a foreign State or territory
included in the abovementioned list, was
appointed to do so.
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If the obligations regarding the CbC
reporting are not met, the tax
inspector may impose an
administrative fine of at most EUR
100,000.
Note: The amendment inserted in the
2015 Finance act project which would
have involved accounting country
reporting for all enterprises, on the
model of bank reporting obligations
since 2014, eventually was not
adopted.
The CbC reporting measure was
submitted to the Constitutional
Council and declared compliant with
the Constitution on December 29,
2015.
French transfer pricing declaration
(Cerfa 2257-D)
The current transfer pricing
documentation rules in article 223
quinquies B have been completed with
new obligations. The transfer pricing
declaration — that has been
introduced by the Finance Law for
2013 and comes in addition to the
requirement to have a complete
documentation report available in
case of a tax audit — henceforward
must be submitted online (art 86 of
the Tax Procedure Code). Further, in
case of tax integration, the ultimate
parent company is requested to
submit this report for the whole
group.
The implementation of CbC reporting
and transfer pricing documentation
changes will provide the French tax
administration with new data and
different sources of information,
allowing it to expand its analysis
beyond the unique local
documentation to perform risk
assessments and conclude on the
arm’s-length character of the group
and local transfer pricing policy. As a
result, the new rules are likely to
trigger an increase in tax audits
focused on transfer pricing.
To be in a position to submit the CbC
report within the given timeframe, it
is recommended that French groups
that have not already started the
collection of data to complete the CbC
report should begin considering how
the information and data will be
reported and collected, and whether
they possess the appropriate financial
systems and necessary resources.
The takeaway
The introduction of the CbC report in
France will impose additional and
significant transfer pricing and tax
requirements for French parent
companies and French MNE
subsidiaries. The new requirements
demand even more transparency from
French taxpayers, which now must
comply with a four-tier transfer
pricing documentation obligation (a
CbC report, a Master file, a Local file,
and a transfer pricing declaration).
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Let’s talk
For a deeper discussion of how this issue might affect your business, please contact:
Transfer Pricing
Pierre Escaut, Paris
+33 (0) 1 56 57 42 95
[email protected]
Xavier Sotillos Jaime, Paris
+33 (0) 156 57 43 42
[email protected]
Eric Bonneaud, Paris
+33 (0) 1 56 57 41 33
[email protected]
Myriam Elle, Paris
+33 (0) 1 56 57 40 70
[email protected]
Transfer Pricing Global and US Leaders
Isabel Verlinden, Brussels
Global Transfer Pricing Leader
+32 2 710 44 22
[email protected]
Horacio Peña, New York
US Transfer Pricing Leader
+1 646 471 1957
[email protected]
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