The Finance Act for 2024 has enacted the tightening already observable in the field with regard to transfer pricing, by reinforcing the documentary system weighing on companies. In addition to lowering the thresholds for transfer pricing, documentation is now formally enforceable against companies. In order to make companies more accountable for the documentation they produce, and to reinforce the effectiveness of tax audits, Article 116 of the 2024 Finance Act has supplemented Article 57 and made transfer pricing documentation enforceable for financial years commencing on or after January 1, 2024.
But are we to understand, then, that documentation covering financial years beginning on or after January 1, 2024 will henceforth be enforceable; or that all documentation produced from that date onwards, irrespective of the financial year it covers, will be enforceable?
While the law does not settle the matter, it seems fairly certain to us that the event to be taken into account is not the fiscal year, but the duty to communicate. As a result, any documentation, even relating to a past or even an old financial year, will now be enforceable against the company, as long as it is produced to the tax authorities after January 1. Thus, in the context of an accounting audit, in the event of a discrepancy between the pricing policy declared by the company and the one it actually applies, the difference between the result recorded and the amount it would have reached if the documentation had been respected is now presumed to constitute an indirect transfer of profits, which the tax authorities can reintegrate even for the past.
In support of this position, it should be noted that this measure does not create a new obligation for the taxpayer, but rather clarifies its scope. It is therefore not subject to the non-retroactivity rules of tax law. Above all, the tax judge had already settled the question, relying on the content of the documentation produced during the audit operations to assess the validity of the rectifications made by the administration. In two recent cases before the Cour administrative d'appel, the judge referred to passages in the taxpayer's transfer pricing documentation to assess the correct application of the remuneration method used. In the Sumitomo case, for example, the Lyon CAA noted that the net margin method, although included in the documentation, had not in fact been applied (no. 21LY02821). In the Itron ruling, the Paris CAA relied on the explanation provided in the documentary report for transfer pricing adjustments to discredit the interpretation made by the tax authorities (no. 21PA04452). In these two cases, therefore, it was the content of the documentation that steered the debates and gave rise to an obligation on the part of the taxpayer. Even before opposability was conferred by the Finance Act, it had already been established in practice.
