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This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.
In case of disagreement several appeal procedures are available.
During the course of the audit and before receiving the formal notice of collection of tax assessments, the taxpayer has the legal right to meet with the supervisor of the auditor (to know more about this subject check Appeal) and if needed, in a second step, the directorate contact (to know more about this subject check Appeal).
If the taxpayer and the tax authorities disagree on the facts giving ground to the tax assessment, each party is entitled to refer the matter to the relevant district commission (to know more about this subject check Appeal).
Last, it is possible to file a formal claim (to know more about this subject check Appeal). before the tax authorities and if the tax authorities still disagree with the taxpayer, to submit the case to the lower tax court (to know more about this subject check Appeal). The tax authorities and the tax payer may lodge an appeal to reverse the judgment of the lower court. The decision of the court of appeal (to know more about this subject check Appeal) can be lodged at the Supreme Court (to know more about this subject check Appeal) if the conditions are met.
In order to avoid a double taxation of the same profit both in France and in the jurisdiction of the related party, it is often necessary to refer the matter to the competent authorities mentioned in the applicable tax treaty. However it is important to know that the competent authorities do not have the obligation to solve the double taxation resulting of a transfer pricing adjustment.
The tax treaties signed with Canada, Germany and USA give the option to request an arbitration. Entities resident in EU countries may benefit of the EC arbitrage convention which permit to suppress any double taxation.
European Council has adopted a Code of Conduct to eliminate double taxation in cross-border transfer pricing cases between the EU Member States which ratified the EC Arbitration Convention (See Flash below). As a result, disputes should be resolved within a maximum of 3 years according to a common procedure. This common procedure covers among other issues, a common definition of the starting point of the 3-year period to introduce a request, of the starting-point of the 2-year period during which the competent authorities must try to reach an agreement on the elimination of the double taxation, of the arbitration procedure if competent authorities failed to reach an agreement within the 2-year period.
In addition, the Code of Conduct also recommends that EU Member States collect no tax during cross-border dispute resolution procedures.
IMPORTANT: All States which were EU Member States by May 1 st, 2004 have deposited the instruments of ratification extending the EC Arbitration Convention on the elimination of double taxation. Extension of the EC arbitration convention is effective as of November 1 st, 2004.
On June 27, 2006 the EU Council adopted the code of conduct for the effective implementation of the EU Arbitration convention on the elimination of double taxation in connection with transfer pricing adjustment of profits of associated enterprises.
The Convention on the Accession of the 10 new EU Member States to the EC Arbitration Convention was published on 30 June 2005. It will enter into force between the EU Member States that have ratified it three months after the deposit of the instrument of ratification by these EU Member States.
French tax authorities published very detailed new guidelines 14 F-1-06 providing details on the scope, the implementing conditions and the application process for MAPs under OECD model convention (2005) and EC arbitration convention . French tax authorities state that they intends to implement the Code of Conduct regarding EC Arbitration convention and transfer pricing adopted by the European Council on December 7, 2004.
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