Wednesday, 21 February 2024

Transfer pricing update France and Italy

(France) Already in 2023, the French government stated that their new plan to combat tax- and customs (‘public finances’) fraud would introduce new measures to strengthen transfer pricing control/audits among taxpayers. These measures have now been introduced into law by the French Budget Bill 2024 and are applicable as of 1 January 2024.

(Italy) A legislative decree published on 12 January 2024 has changed the deadline for filing the corporate income tax return for fiscal years starting after 31 December 2023. This change also has an impact on transfer pricing and the so-called penalty protection regime for preparing transfer pricing documentation.



This news flash is intended to provide you with a short introduction into these new measures. These new rules may be of importance for MNEs with a presence in one of these countries and they should consider if there is an impact on the transfer pricing (compliance) strategy.  In summary, the following will change:

  • In France, the existing thresholds will be lowered and the importance of having qualitative transfer pricing documentation will increase.
  • In Italy, the corporate income tax return deadlines will be shortened from 11 to 9 months, also impacting deadlines for preparing and signing transfer pricing documentation under the Italian penalty protection regime.


The new Budget Bill 2024 was published on 30 December 2023 and provides for a strengthening of the thresholds for the preparation of transfer pricing documentation (Local File and Masterfile). The relevant legal provisions now state that any legal entity established in France must prepare and keep available for the tax authorities transfer pricing documentation in case of one of the following conditions is applicable:

  • annual turnover (excl. taxes and gross assets) equal to or more than EUR 150 million (prev. EUR 400 million);
  • they directly/indirectly hold more than 50% of the capital or voting rights in a legal entity, organization, trust or similar institution established in France or abroad that exceeds the abovementioned turnover threshold;
  • more than 50% of their capital or voting rights are held directly/indirectly by a legal person that exceeds the abovementioned turnover threshold; or
  • is part of a group (consolidation) in which at least one of the group companies falls under one of the abovementioned conditions.

Transfer pricing documentation must be in place at the time a tax audit commences. Taxpayers can submit transfer pricing documentation, or complete them, at the request of the tax authorities within 30 days

It is clear that as a result of (substantially) lowering the abovementioned threshold, more taxpayers will fall under the obligation to formally prepare transfer pricing documentation. In that regard, it is also important to take into account that exceeding abovementioned thresholds will not only be assed at the level of a French company, but also at the level of the group the French entity belongs to.

Furthermore, the Budget Bill 2024 also introduced the following novelties:

  • a presumption of indirect transfer of profit abroad in case the transfer pricing policy implemented by the taxpayer differs from the transfer pricing methods as described in its transfer pricing documentation. Although this is a rebuttable presumption, the burden of proof is reversed in such cases. The quality of transfer pricing documentation is hence even more important.; and
  • an extension of the statute of limitation for the transfer of so-called hard-to-value intangibles to related parties abroad. Hard-to-value intangibles, in brief, are intangibles for which at the time of the transaction no reliable value can be determined. In that regard, the limitation period has been extended from 3 to 6 years and the tax authorities can use relevant information in hindsight to assess the value of these so-called hard-to-value intangibles. As categorizing an intangible as a hard-to-value intangible based on OECD and economic principles is not that common and in our view restricted to specific situations, it is to be seen how the French tax authorities will approach such categorization.

Moreover, the penalties for non-compliance with the transfer pricing documentation requirements after the request of the tax authorities has increased from EUR 10.000 to min. EUR 50.000.

Noteworthy, the French Budget Bill 2024 did not change anything with regard to the annual transfer pricing From 2257-SD. This form, which can be considered as a simplified version of the Local File and Masterfile, must be, in any case, submitted by taxpayers whose turnover or gross assets is at least EUR 50 million within 6 months following the corporate income tax return filing deadline.


On 12 January 2024, the Legislative Decree of 8 January 2024 was published, modifying the deadlines for filing tax returns, resulting in a shorter filing period.

In that regard, article 11 of this Legislative Decree provides for a shorting filing period of the corporate income tax return. As of 2 May 2024, the latter tax return must be filed within 9 months after the end of the fiscal year. Previously, the deadline was 11 months. For companies whose fiscal year coincides with the calendar year, this means that the corporate income tax return must be filed by the end of September. However, the decree provides for a transitional arrangement for companies whose fiscal year does not coincide with the calendar year. If the deadline for filing the corporate tax return that relates to a fiscal year that was already ongoing before 31 December 2023 expires after 2 May 2024, the old 11-month deadline will continue to apply for this fiscal year.

This change also has an impact on the optional ‘penalty protection regime’ available in view of preparing transfer pricing documentation. When opted for and documentation is in accordance with specific Italian rules,  it allows Italian taxpayers to benefit from a penalty protection regime in case of a tax assessment.

The penalty protection regime is applied on a transaction-by-transaction case, and only as long as transfer pricing documentation (Local File and Masterfile) are prepared in accordance with the legal Italian requirements, are electronically signed by a legal representative of the company, and electronically stamped (timestamp) within the same deadline as the filing of the corporate income tax return. Given the rather substantive penalties (i.e., between 90% and 180% of the higher corporate taxes assessed as a consequence of the upward adjustment), the appropriate preparation and signing of transfer pricing documentation cannot be underestimated.

Thus, as of fiscal year 2024, taxpayers that opt to benefit from the penalty protection regime will face a shorter period to prepare transfer pricing documentation.

Tine Slaedts, Ben Plessers, Kenny Van Tulder, Patrik Pashaj

Tiberghien economics