French tax authorities reject traditional transaction methods
November 21, 2008
The French tax administration is increasingly turning to the transactional net margin method of determining an arm's length price. Jean-Luc Trucchi argues that rapidity and efficiency should not be used as an excuse for using a simplistic method that may generate a biased application of the arm’s length principle.
According to the OECD guidelines, all multinational enterprises should be able to justify, to the French tax administration (FTA), the transfer pricing policy applied as well as the method used to determine an arm’s length price for intercompany transactions. The FTA is increasingly turning to the transactional net margin method, which tends to be global, efficient and simple. But rapidity and efficiency should not be turned into an excuse for using a simplistic method that may generate a biased application of the arm’s length principle.
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