Transfer Pricing Agreements - France Chapter

To what extent are a multinational enterprise's intra-group contracts respected for transfer pricing purposes?

While the arm's length principle is meant to be the guideline and reference of any intra-group contract, in order to spread as fairly as possible the income derived from a transaction, this may not always be the case in practice in a situation where parties are related and respective interest may not be divergent. In such cases, article 57 of the French Tax Code (FTC) enables the French tax authorities (FTA) to rectify the income statement declared if any profit has been shifted indirectly out of France, notably via non arm's length contractual terms.

By way of principle, the French tax law still very much relies on the contractual terms when analysing an intra-group transaction. The contract remains the starting point of any tax or transfer pricing analysis, just as outlined by the Organisation for Economic Co-operation and Development (OECD) Transfer