1. International legal and administrative frame work: necessary legal and administrative frame works
Central American Tax Administration october 5-7 Dan salvador El Salvador

2. 1/ Transfert pricing documentation
article L13AA French Procedure: obligation to justifie Transfert Prices
2/ MAP ’s and Arbitration procedure ( UE and US)
No double taxation
3/ APA
No adjustment and security for companies
4/ information exchange and anti-evasion and avoidment rules

3. 1/ Transfert pricing documentation
A documentation to justify Transfert Prices
A recommandation of the UE Council (Code de conduite adopted le 27 juin 2006)
Objectives :
More security for the companies
the tax administration will get a writing documentation to make an evaluation of the transfert pricing policy
the documentation gives informations: the tax administration have the possibility to ask questions during the audit and to audit deeply some questions

4. 1/ Transfert pricing documentation
Principes
documentation have to be « contemporain »: the company have to modify the documentation when necessary ( one changement of organisatin which have an impact on transfert pricing policy and the documentation have to evoluate)…
…if no: sanction for the company
an obligation for:
big companies ( turnover or assets = K€) or subsidiaries (or Permanent etablishment) hold > + 50% by a foreign company wich provides bussiness in France if the mother company = K€
have to justify the transfert pricing policy ( all transactions with linked companies definited by the french Code article 57)

5. 1/ Transfert pricing documentation
Transfert pricing documentation: 2 levels of informations
general one on the group
spécific on the french company audit
general informations
group activities (incuded evolution during the years audited)
juridics and operational structures and organisation
description and allocation of the fonctions and the risks
main intangible assets( brands, know how, …)
transfert pricing policy

6. 1/ Transfert pricing documentation
Specific informations
french company activities (included evolution during the years auditing)
transactions with linked companies (nature, amounts included management fees, royalties, Cost Contribution Arrangements, …..)
APA, rulings
methods to determinate the transfert pricing (fonctions analysies, assets used or rent, risks assumed, justification of the choise methods)
strategie to elaborate the comparables panel, analysis of the comparables
other informations

7. 1/ Transfert pricing documentation
Practical Modalities
documentation have to be « contemporaine »
presentation when the audit start
suppose
that the documentation is already established and actualise when the income taxdeclaration is subscribe
transfert princing have to be conform with the OECD principles
compables panel have to be a new one ( with recent informations)
each transaction: general and specific informations

8. 1/ Transfert pricing documentation
Sanctions
obligation non satisfied
no respect of the obligations or if the documentation is not correct
official letter to ask the documentation, 30 days to present the documentation
mention of the elements of the documentation that the company have to provide and of the sanctions which can be applied
if the company aske for 30 days more it could be accorded: reasons have to be explain in a lettre by the company
Penalties for each periode audit € or
5% of the total amounts of the profits transfered according the disposition of the french Code (article 57)

9. 1/ Transfert pricing documentation
Penalties application
the audit team manager decides which kind of penalties will be applied
company don ’t lose the right to open a MAP procedure ( means that the penalty is not a grave one according the eurpean convention 23 juillet 1990)
the company have to pay the penalty (article L 189 A of LPF non applicable in case of MAP)
all informations are confidential ( fiscal secret)

10. 2/ MAPs and Arbitration procedure in France and in the European Union
Article 25 convention OCDE model
Objectiv :
Elimination of Double taxation ( origine an adjustment in transfert pricing)
Consequences
correction of the fiscal profit ( it could be in the 2 countries)
and
the foreign company have to bring the money back to the company which support the tax adjustment

11. 2/ MAPs and Arbitration procedure in France and in the European Union
Principes
to open the procedure: different timings( the convention): Germany : no ; US : 3 years ; Belgique : 6 months
no obligation to find a solution but negociations succeed in 98% of cases
no timing to find a solution but solution find between 18 months and 6 years
a negociation between the competent autorities ( company not representated)

12. 2/ MAPs and Arbitration procedure in France and in the European Union
Evolutions
article L189A : the (only) TP adjustment amount is not recovered: ( from the opening date of the MAP procedure to the 3rd month after the decision have been notified to the tax payer ( agreement or not)).
négociations 2 times per year with our main partners
France: a pragmatic approach
respect of the OECD preconisations
number of procedures increase and are ore and more complex

13. 2/ MAPs and Arbitration procedure in France and in the European Union
Arbitration procedure in the UE and with US
European Convention of Arbitration (adopted 23/07/90)
Principes
if the MAP ’s doesn ’t succeed after 2 years of negociation, possibility to open an arbitration procedure
have to be open before 3 years according to the dtae of the adjustment proposition
in some cases of tax avoidance specific penalties: no possible to open MAP ’s (en France : mauvaise foi)

14. MAPs and Arbitration procedure in France and in the European Union
Consequences
2 years to find a solution
if not the Arbitration Commission have 6 months to propose a resolution
the tax payer can be heard
decision must be find in a delay of 6 months
France position ’s
favorable to the arbitration
only 2 cases at this time and 2 cases with France
Draft 3 septembre 2009
Pratique des Prix de Transfert - 6 octobre Paris 14

15. 2/ MAPs and Arbitration procedure in France and in the European Union
OECD influence
more resources allocated to MAPs
less agressiv legislations: because MAPs will be open
new paragraphe 5 article 25 of the OECD convention: after 2 years discussion, if no success arbitration
France support OECD position
Arbitration procedure included in the new convention signed with the US.
Draft 3 septembre 2009
Pratique des Prix de Transfert - 6 octobre Paris 15

16. 3/ APA
since the 17 september 1999, french tax administration propose to the companies to present their transfert pricing policy. An analyse and a validation of this policy
this procedure is performant for delicate situations according the armth length principle
the companie ask the competent authorities to give an agreement on different kinds of transactions
To succeed dialogue and coopération are necessary

17. 3/ APA
Article L 80 B 7° du LPF and instruction 4 A-8-89, n°171 du 17 septembre 1999
Objectifs
more security for the companies and for the states ( in a changing context)
less double taxation risks
determination of the method to build the transfert prices with the company and modalities to control the respect of the agreement
Caracteristics
agreement negociation and conclusion between the competent autorities according the fiscal conventions
agreement concluded generally for 5 years
transparence and exchanges between the company and the competent autorities

18. Pratique des Prix de Transfert - 6 octobre 2009 - Paris
3/ APA
Documentation and informtion asked
in an administrative instruction 17 septembre 1999
juridic and operational organisation, financial documentation, TP policy, economic documentations, work on comparables ( research strategy, final panel, ….)
A simple procedure
contacts and elaboration of the agreement project
agreement project deposit
work with the competent autorities
négociation between competent autorities
agreement ratification and signature
the companies have to apply and respect the greement
Draft 3 septembre 2009
Pratique des Prix de Transfert - 6 octobre Paris 18

19. Pratique des Prix de Transfert - 6 octobre 2009 - Paris
3/ APA
France Doctrinal position
more bilateral and multilateral agreement
the APA objectiv des APP is to give security to companies: possible only between different competent autorities
OECD recommandations
Transparency with our partners ( no avoidance pratics)
Possibility for an unilateral agreement
less security for the company
some partners give unilateral agreement
Draft 3 septembre 2009
Pratique des Prix de Transfert - 6 octobre Paris 19

20. Pratique des Prix de Transfert - 6 octobre 2009 - Paris
3/ APA
Unilateral APA: an exception in France
If APA does not exist in the other country part to the transaction
Small companies, many small transactions with many countries, simple transactions, limited risks for France
French APA: the main Caracteristics
83% bilateral ; 4% multilateral ; 13% unilateral
75%: an agreement for 5 ans ore more
about 20 months to get the agreement
cars products, finance area, foods industries
Draft 3 septembre 2009
Pratique des Prix de Transfert - 6 octobre Paris 20

21. Pratique des Prix de Transfert - 6 octobre 2009 - Paris
3/ APA
Connections with the audits directorate
even if an APA is open, an audit is possible
no retroactivity for an APA (administrativ instruction 4 A )
Specific procedure for small companies
administrativ instruction 4 A november 2006
PME usually don ’t have any transfert pricing documentation
a simplify procedure: « diet » documentation to produce
services to the small companies to write transfert pricing policy and to find comparables
Draft 3 septembre 2009
Pratique des Prix de Transfert - 6 octobre Paris 21

22. 4/ information exchange and anti- avoidment and evasion rules
information exchange: a new concept in the french law: non cooperativ state and territory ( article 238 O A french code)
different rules for territories which don’t accept international standards in terms of information exchange ( more than 120 conventions already signed)
one list of countries the 1st january 2010: criteria
- not an UE member
- no convention about information exchange concluded with France
- no convention of information exchange signed with 12 states or territories
- the quality of the information exchange will be auditing by the OECD ( peer review group will make an evaluation on 87 juridictions)
countries will keep out and some will be new, every years, on the list

23. 4/ information exchange and anti evasion rules
Very strong new anti evasion rules: the objectiv is not to have to apply them but that the exchange of information progress
profits coming from a non cooperatif state: dividend, royalties and interests will be tax in France ( 209B 1 5°). If a tax have been payed in the non cooperatif state it will not be imputed ( X2 taxation)
one french company have a subsidiarie
- in a non cooperativ state: the company will have to prove that this entity have a real activity ( industrial or commercial) and that the reason to be located in this territory is not only to pay less taxes( ex companies in Hong kong to developpe bussines in China). If it doesn ’t prove the profit will be tax in France. It will have also to prove the origin of the profit ( royalties from linked companies, management fees to linked companies, gestion of the shares of the linked companies). If the profit coming from those activities represent more than 20% of the all profit they will be tax in France ( company have to produce all the element to prove)

24. 4/ information exchange and anti evasion rules
A french company pay an expense:
- to a foreigner living in a territory with law level of taxes: the company have to prove that the payment is armth length and that something have been done: if the evel of prove is not satisfied adjustment
- to a foreigner living in a non cooperativ country: the company will have to subscribe a special declaration and have to prove that the payment is armth length, that a service have been provided and that it will not have another choise than to pay in those kind of state. If no prove adjustment and taxation in France.

25. 4/ information exchange and anti evasion rules
Dividends pay by a french company to a person wich is not a resident have to be submit to RAS ( article 119bis 2 French Code)
18% with a special return of 40% for persons who leave in a country which have sign a convention with an article wich provide administrativ assistance to fight against tax evasion
new article 119 bis create a specific rate of taxe: a dividend pay to a person living in a non cooperativ country will support 50% of RAS. That means for ex if the dividends are pay to a financial subsidiary ( which is there to introduce opacity) the RAS will be apply
payment by an assurance company to will be support 50% of tax if the ayment is done to a person which is a resident in a non cooperativ state
Dividends receive from a subsidiary located in a non cooperativ state wil not be eligible to the mother an daughter regim

26. PERFIL de los FONCTIONARIOS
Tax inspector
must have an exam in a university: 3 years minimu
a selection: one natinal exam
7.000 persons: 720 succeed
1 year training in a national school to learn: compatability, fiscal rules, procedure rules….

27. PERFIL de los FONCTIONARIOS
Tax inspecteur in DVNI
a selection
date of arrival 1 september. Until march: training with tax inspector whom have experience. Go on site. 4 weeks of theorical training to learn specific rules for large tax payers companies
Transfert princing team
- international expert: 3 lawyers, jurists, 2 economists,
- financial experts: 2 doctors in mathematics, high level in finance
- private training:
- training in TP, in comparative fiscal organisation and tax heaven

28. 4/ information exchange and anti evasion rules
Gracias
Questions?