Transfer Pricing


Expert operational assistance with transfer pricing

Economic Analysis, Benchmarking

Economic Analysis, Benchmarking

We have access to tools that allow us to carry out economic analyses and benchmarking exercises including the Orbis, CUFTanalytics, and the Bureau Van Dijk ktMINE databases. We undertake all studies required to justify your transfer prices, including on interest rates, services, goods, trademark and technology royalties.

Litigation / Audit Assistance

Litigation / Audit Assistance

We assist with all stages of tax audits and litigation related to transfer pricing in France and abroad (involving both subsidiaries and permanent establishments).

Documentation, Compliance

Documentation, Compliance

We help you prepare your transfer pricing documentation (Master File and Local Files) in full compliance with the OECD model and applicable local standards through our international offices and by using the IBFD database, which gathers information on all national tax regimes.



In order to be able to advise you on all international matters we rely on Quantera Global, an international transfer pricing consultancy, our offices across the globe, and databases such as IBFD, which gather information about all national tax regimes. We also work closely with our customs department in particular on matters related to customs value.

Our Offers

Our service offers are adapted to the size of your company and the nature of your transfer pricing obligations.


We also adapt to your budget, and provide customised services based on our extensive experience (model form intra-group contracts, benchmarking and template pricing), in order to offer a truly tailored service.

French company in an international context


Foreign companies with subsidiaries in France


Start-up expanding internationally

Company with a turnover
of less than 450M euros

Company with a turnover
of more than 450M euros

  • Choosing the offshore structure
  • Implementing the intra-group pricing policy
  • International structuring of the business and fund flows

Transfer pricing diagnostics:

  • understanding the group’s international structure,
  • functional analysis of all group entities,
  • identifying policy risks (transfer pricing and permanent establishment)
  • providing recommendations on ways to optimise policies and manage permanent establishment risks.
  • Quantitative modeling
  • Simplified documentation
  • OECD-compliant transfer pricing documentation (Master File, Local Files and CbCr)
  • Economic studies, benchmarking and financial analyses to demonstrate the compliance of prices applied to all intra-group flows with the arm’s length principle.
  • Intra-group contracts
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  • Transfer pricing diagnostics:
    – understanding the group’s international structure,
    – functional analysis of the French entity,
    – identifying policy risks (transfer pricing and permanent establishment),
    – providing recommendations on ways to optimise policies and manage permanent establishment risks

  • Transfer pricing documentation:
    – Ensuring compliance of the Master File with French standards,
    – Compiling the Local File

  • Assistance with tax audits

  • Tax litigation: comprehensive management of legal proceedings


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Transfer pricing is now part of a complex tax environment
that requires increasingly complex regulations.

The context


OECD Standard




The prices applied to transactions between various entities of an international group must be justified to the national tax authorities.


The price of these transactions between related companies must comply with the arm’s length principle and correspond to the prices that would have been applied to independent third parties.


In France, compliance of transfer prices with the arm’s length principle is enshrined in article 57 of the General Tax Code, which provides that the prices applied by a French company to other companies of an international group must comply with this principle.



Read article


Furthermore, these companies are required to justify the price levels applied either as part of a tax audit and at the request of the tax authorities (art L13 B of the Tax Procedure Handbook), or, for larger companies, when preparing pre-established documentation as part of a tax audit (article L13AA of the Tax Procedure Handbook).



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The content of the documentation for these companies has been specified in detail by decree no 2018-554 of 28 June 2018.


Beyond the national context, transfer prices are also regulated by bilateral tax treaties, where the arm’s length principle is taken from article 9 the OECD and UN Model Tax Conventions.


The OECD has, in its various reports on transfer prices, specified the scope of transfer prices, the arm’s length criteria and the economic analyses that must be carried out before setting transfer prices.


For developing countries outside the scope of the OECD, and in particular African countries, the UN published a transfer pricing guide in 2013 that also specified the various transfer pricing regulations, including scope of application, methods, etc.

Read PDF


The European Commission has also made recommendations through the European Commission Transfer Pricing Forum, which is composed of experts who advise the Commission and issue opinions on transfer pricing matters.

Read article


All transactions are subject to transfer pricing and must comply with the arm’s length principle, including the following:

  • Tangible and intangible assets: products, trademark royalties, patents, know-how, etc.
  • Services: research and development, management, administrative and financial services, marketing, human resources, etc.
  • Financial flows, in particular intra-group loans
  • Exceptional events, including company restructurings, mergers and acquisitions, asset transfers, etc.


Transfer prices are justified on the basis of the following two elements:

  • A functional analysis carried out to identify the role of each party to the transaction and assess the functions it carries out, the risks it incurs and the assets it holds.
  • An economic analysis carried out to determine the arm’s length price through comparative benchmark exercises such as those included in our offers.



Transfer pricing implications 


International tax competition


Transfer prices fit into the context of increasing international tax competition. 


Despite the efforts of various organisations, in particular the OECD, the UN and European Union bodies, to reach an international consensus, individual administrations are upholding different positions on how to apply these principles, and are implementing approaches other than the arm’s length principle, which results in a high number of adjustments and double taxation of the same tax base in different jurisdictions.


At the European level, for example, the CCCTB Project on the implementation of a Common Consolidated Corporate Tax Base has still not materialised despite numerous ongoing discussions at the European Commission and many proposed drafts.


This lack of harmonisation on tax bases and taxation rates is a reflection of a complex international context where international tax competition remains firmly present.


Click below for an interview with Cyril Maucour, the DS Avocats partner in charge of our transfer pricing practice with the Friedland Institute on the topic of tax competition in Europe, and in particular CCCTB issues:




Increase in the number of tools available to tax authorities


Tax authorities today have access to increasingly powerful and varied tools for controlling the transfer prices applied by international groups.


First, they have access to the accounts of the audited company, as well as the group’s consolidated accounts. They can therefore check whether the transfer pricing policy has been applied to the group’s accounts by looking at intra-group contracts and invoices.


These checks are now facilitated by the obligation to keep computerised accounts that comply with the model prescribed by the tax authorities. In France, for example, the obligation to submit the FEC file in the event of an audit came into effect in 2014.

Read article


In the context of transfer pricing, authorities have access to full transfer pricing documentation for the companies that fall within the scope of these regulations. In France, these are any groups that generate a consolidated turnover of more than 400 million euros.


The BEPS project, which has been implemented by means of various tools, in particular the multi-lateral instrument (MLI), has succeeded in significantly reinforcing the transfer pricing obligations of international companies and has contributed to an increasingly complex environment:


  • The implementation in 2016 of the Country by Country Reporting (CbCr) requirements, codified into law in France by article 223 C of the General Tax Code, enabling the automatic exchange of information between tax authorities;

Read article


  • The entry into force of The Multilateral Instrument (MLI), which modifies existing bilateral treaties on the basis of various levels of transparency in more than 40 OECD member countries.

(Link to the list of signatories and table of current bilateral ratifications:



  • The introduction of bilateral conflict resolution mechanisms (in particular amicable settlement and arbitration).


Similarly, at European level, a number of both draft directives and already-adopted directives have also raised the general level of transfer pricing obligations, such as, in particular, European Directive 2018-822 of 25 May 2018, known as DAC 6, which notably requires tax schemes considered aggressive to be declared.



 Implications for international groups


Transfer pricing is a key issue for international groups, as compliance with the arm’s length principle enables them to:


  • Limit the risks of being deemed to have a permanent establishment in various countries as well as the risk of double taxation;


  • Avoid audits, adjustments, and the application of significant penalties, both administrative and criminal


As an example, the majority of corporate tax adjustments relate to permanent establishment issues and transfer pricing (mainly prices for inter-company services). According to the data published by the finance ministry for 2018, 85% of tax adjustments were related to the matters indicated above.


The situation is similar in many other countries.


This has multiple implications for companies as they must now manage several distinct issues:


  • the basic issue of tax adjustments, or the fair application of the arm’s length principle and proof of compliance with the principle;


  • the issue of documentation penalties, which can be significant (for example, in France, the penalty applied is the highest of the following amounts: €10,000, 0.5% of the amount of the wrongly-documented or non-documented transactions, or 5% of the adjustment amount);

Read article


  • and the issue of penalties (40% or 80% in France, for example), as well as criminal prosecution for tax evasion. It is worth noting that in France the risk of criminal prosecution has been increased by the entry into force of the law of 23 October 2018 on the fight against tax evasion, which put an end to the budget ministry’s monopoly on prosecuting tax evasion (the “verrou de Bercy”), by introducing the obligation to submit to the public prosecutor’s office the most significant tax adjustments that exceed the €100,000 threshold for adjusted taxes.




Transfer pricing audits and litigation


Tax audits in France

In France, transfer prices can by audited through traditional tax audit methods by carrying out an accounts check procedure, for example.


However, the Tax Procedure Handbook provides transfer pricing-specific procedures which allow the tax authorities to check the prices of intra-group transactions directly (article L13B) and to access certain information relating to the transfer pricing policy in effect, in particular the transfer pricing documentation required by article L 13 AA of the Tax Procedure Handbook.



Simultaneous tax audits

Local tax authorities may also carry out joint audits with other tax authorities.


The OECD’s Committee on Fiscal Affairs has put together a model convention for simultaneous tax audits for countries wishing to enter into this kind of cooperation.


The OECD has specified that these procedures will enable tax authorities to communicate more easily and minimise the difficulties encountered by taxpayers and tax authorities when setting transfer prices. The OECD also recommends that countries use these procedures more often and that they facilitate the exchange of information.

Read PDF


Read article



Transfer pricing litigation in France

 Before the matter is brought before the courts, companies are able to go through preliminary procedures including escalation processes or referring the matter to bodies such as the appeals officer (Interlocuteur Départemental) or the departmental commission for direct tax (Commission Départementale des Impôts Directs) in an attempt to reach an agreement. 


The number of contentious cases related to transfer pricing in France remains high, however, and the Administrative Appeal Courts and State Council are frequently asked to rule on these matters.



International dispute resolution

 In order to limit the instances of double taxation (for example, the payment of corporate tax in one country and withholding tax in another), tax authorities and taxpayers have access to amicable dispute settlement procedures.


These arbitration and/or amicable settlement procedures are found in bilateral tax conventions, in article 25 of the OECD and UN models, and in article 16 of the multilateral instrument.


At the European level, the European Arbitration Convention of 23 July 1990 was supplemented by an amicable settlement procedure provided by European Directive 2017/1852, which was transposed into French law by the finance law of 2019, in articles L 251 B et. seq. of the Tax Procedure Handbook.

Read article


International groups also have access to other transfer pricing-specific procedures that allow them to avoid conflicts with the tax administration on these matters.


Groups can thus request transfer pricing rulings referred to as Advance Pricing Agreements (Accords Préalables de Prix – APAs), which may be unilateral or bilateral, and which allow both tax authorities involved to provide input.


Our transfer pricing team will assist you with tax audits and litigation in France as well as abroad by providing support to your company through each stage of the proceedings.


The team will also assist with APA negotiations and with reaching amicable settlements to disputes with the tax authorities.


    OECD Standard


    At the international level, the OECD plays an essential role in defining transfer pricing structures. The organisation publishes a number of reports detailing its position on transfer pricing issues and provides standards, in particular as part of the BEPS action plan published in 2015, where it redefined its documentation model and revised its standards in terms of economic reasons and how transfer pricing methods are determined. The OECD maintains a report that sets out its transfer pricing guidelines.




    Economic reasons


    Functional analysis

    The OECD considers that a functional analysis must be carried out in order to separate the transaction in question and determine if the audited or non-audited transactions are comparable.


    Such an analysis is used to identify which activities and responsibilities hold economic significance, the assets used or provided and the risks incurred by the parties to the transaction.


    The analysis focuses on what the parties actually do and the capabilities they deploy. The structure and organisation of the group must therefore be understood.


    A functional analysis is therefore used to determine the functional profile of each party to the transaction and to choose which party to audit.


    In fact, when applying transfer pricing methods and in particular the cost plus method, the resale price method, and the transactional net margin method, a party to the transaction must be chosen for which a financial indicator is assessed.


    As a general rule, the assessed party is that to which a transfer pricing method can be most reliably applied and for which the most reliable comparables can be found; most often, this is the party for which functional analysis is the most straightforward.



    Determining the transfer pricing method

    The method chosen must be the most appropriate to a specific case. The choice of method depends on the particular features of each method, whether it is consistent with the nature of the transaction and the functional analysis that is carried out.


    Other elements must also be taken into account when choosing the most appropriate transfer pricing method for a transaction, including the degree of comparability of the audited and independent transactions, and the availability of information, in particular on independent comparables.



    Transfer pricing methods


    Traditional methods based on transactions

    There are three methods for determining transfer prices based on transaction prices.


    1) The comparable uncontrolled price method (CUP)


    This method consists of comparing the price of a good transferred or service provided as part of a controlled transaction to that of a good transferred or service provided in comparable circumstances.


    The OECD therefore considers that a transaction on the open market is comparable to a controlled transaction if one of the following two conditions is met:

    • none of the differences between the transactions in question or between the companies carrying them out is likely to have a significant impact on market price;
    • sufficiently reliable adjustments have been implemented to eliminate the impact of these differences.



    2) The resale price method (resale minus)

    This method consists of beginning with the price at which a product bought from a related company is resold to an independent company and deducting an appropriate gross margin representing the amount out of which the reseller would cover its selling and operating expenses in relation to the functions it performs and generate the expected profit.


    This margin on the resale price can be determined by reference to the margin the same reseller earns on products bought and resold as part of a transaction on the open market (internal comparable) or as part of a transaction between independent companies on the open market (external comparable).



    3) The cost plus method

    This method consists of determining the costs incurred by a supplier for goods transferred or services provided to an associated buyer as part of a transaction between associated companies. A margin is then added to these costs in order to determine the appropriate profit in respect of the functions performed and of market conditions.


    Similar to the resale price method, the margin applied can be determined on the basis of internal or external comparables.



    4) The transactional profit methods 

    A transactional profit method consists of assessing the profits made on a transaction rather than the price of the transaction. The two methods of this kind are the transactional profit split method and the transactional net margin method.



    5) The transactional profit split method

    This method consists of identifying the overall amount of the benefits generated by the controlled transactions entered into by associated companies and splitting it between them on an economically valid basis that approximates the way profits would have been allocated between independent companies.


    This method eliminates the impact on profit of the special conditions agreed upon or imposed as part of a transaction between related companies by determining the way profit would have normally been split between independent companies.



    6) The transactional net margin method

    This method consists of determining the net benefit earned by a taxpayer from a controlled transaction by assessing costs, sales, or assets.


    In order for this method to be implemented, a comparability analysis needs to be carried out in order to determine the arm’s length net margin generated by comparable independent companies.


    The OECD also sets out in detail in its reports the various steps that must be taken in order to carry out a comparability analysis that shows compliance with the arm’s length principle.


    Our transfer pricing team has all the necessary tools to apply all of the above methods in accordance with OECD standards. We also have access to all the databases that enable us to identify comparable companies and prices applied and to calculate the margins to be applied (Obis, TP Catalyst, CUFTanalytics, ktMINE).


      Resource materials


      French law


      Official bulletin of the public finance/tax authorities:


      Tax authorities website:

      International law




      Technical resources


      Transfer pricing litigation in France:



      Tax authorities website:


      Discover all the jurisdictions where we can offer assistance.


      A single point of contact

      Cyril Maucour 

      Paris, France
      +33 (0)1 5367 5000

      DS Avocats


      A leading international law firm


      Founded in 1972 in Paris, DS Avocats has developed its expertise working with both private and public entities. This background combing the public and private is a genuine asset and the firm’s signature feature.





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