2024 Finance Bill: Special Focus on Transfer Pricing

he Finance Bill, published on September 27, 2023, outlines five important measures that affect transfer pricing obligations, which will impact numerous groups and companies, especially those with a turnover between EUR 150 million and EUR 400 million or with gross assets exceeding EUR 150 million.

Lowering the Application Threshold for Article L13AA of the French Tax Procedures Code from EUR 400 Million to EUR 150 Million

This measure will directly affect groups with activities in multiple jurisdictions and a turnover between EUR 150 million and EUR 400 million, or those with gross assets above EUR 150 million. These groups will now be required to prepare transfer pricing documentation, which includes a master file and a local file (Article L13AA of the French Tax Procedures Code). This significantly expands the number of companies and groups subject to transfer pricing documentation obligations. These companies were already required to prepare form 2257-SD, so this measure mainly emphasizes the formality of the process and pushes further the requirements for documentation and justification of transfer pricing policies.

It’s important to note that these changes will be applicable for fiscal years starting January 1, 2024.

Enforceability of Transfer Pricing Documentation

Transfer pricing documentation will now be enforceable in the event of a tax audit, especially when the reported results do not align with the transfer pricing policy described in the documentation. This change is significant, as it’s essential to remember that economic analyses (benchmarking) must normally be updated annually. The requirement for transfer pricing documentation should theoretically include the following:

• Information and tables indicating how the financial data used to apply the transfer pricing method can be linked to the annual financial statements.
• Summary tables of financial data related to comparable transactions, with an indication of the sources from which this data is drawn.

This measure emphasizes the consistency of the provided information.

Increased Fines for Non-Compliance

The previous minimum fine for non-compliance (EUR 10,000) will be raised to EUR 50,000. This amount is a minimum, and the fine can increase quickly. These fines can be raised to:

• 0.5% of the amount of transactions concerned by documents or supplements that have not been provided to the Administration after a formal notice.
• 5% of the adjustments made to the result based on Article 57 of the French General Tax Code, assessed at the conclusion of the audit, for transactions concerned by documents that were not provided to the Administration within the legally prescribed time limits.

Extending the Recovery Period for Difficult-to-Value Intangible Assets

The tax administration may reassess the value of a transferred asset or intangible right that is difficult to evaluate based on results from fiscal years following the year in which the transaction took place (CGI, Article 238 bis-0 I ter, new). Furthermore, the right to reassess could extend up to six years after the transfer of such assets.

This measure could significantly increase tax uncertainty regarding the transfer of intangible assets, which are already particularly difficult to value. It would also require access to the financial data of the acquiring entity (which may include a segmented income statement). Therefore, it may be advisable for taxpayers to closely monitor the transferred intangible assets.

The issue of difficult-to-value intangible assets has already been addressed by the OECD as part of the BEPS project.

Transposition of the Pillar II Directive (Global Minimum Tax at 15%)

The 2024 Finance Bill transposes the rules of the "Pillar 2" directive into domestic law and introduces a minimum tax rate of 15% on the profits of multinational corporations with operations in France, generating consolidated revenue of EUR 750 million or more during at least two of the four fiscal years preceding the considered year. The same threshold applies to French-based companies that are part of a group operating solely in France.

RSM’s Advice

In light of these changes, RSM recommends assessing your exposure to the announced measures, particularly those related to regulatory requirements triggered by the lower threshold.