Transfer Price 2026: Obligations and Tax Risks

Updated March 2026 - Long perceived as a subject reserved for CAC 40 multinationals, transfer prices have become a major issue for SMEs and mid-sized companies as soon as they cross a border. In 2026, the French tax administration will have automated detection tools and a legislative framework (Finance Law 2024) which drastically lowers the mandatory documentation thresholds.

A transfer price is the price at which a company transfers tangible property, intangible assets or renders services to an associated company located in another state (subsidiary, sister company, holding company).

The fundamental principle that governs this matter is the Arm's Length Principle. It requires that the prices practiced between related companies be identical to those which would have been agreed between two independent companies under similar conditions.

The lowering of the thresholds has pushed thousands of French SMEs into the documentary obligation.

1. The documentation threshold at €150 million

Since 2024, the turnover (or gross assets) threshold beyond which complete documentation is mandatory has increased from €400 million to €150 million. This concerns the turnover of the company itself or of any related entity within the meaning of article L. 13 AA of the LPF.

2. The opposability of the documentation

This is the riskiest change. The documentation presented during an inspection is now enforceable. If you change method or if your actual prices diverge from your documentation without solid justification, the burden of proof of the transfer of profit is easier for the tax authorities (legal presumption).

3. Financial sanctions

Failure to present documentation may result in a minimum fine of €50,000 per fiscal year audited, or 0.5% of the amount of the transactions concerned.

The OECD defines five methods to justify the normality of a transfer price.

Transaction-based methods

• ▸CUP (Comparable Uncontrolled Price): We directly compare the price of the product with that of the market. (Ex: price per tonne of raw material).
• ▸Resale Price Method: Used for distributors. We start from the resale price to the end customer and deduct an appropriate margin.
• ▸Cost Plus: Used for service providers or manufacturers. A profit margin is added to the production costs.

Profit-based methods (most used by SMEs)

• ▸TNMM (Transactional Net Margin Method): We compare the net operating margin of the transaction with that of comparable companies.
• ▸Profit Split: Used when both entities provide unique added value (e.g. patent co-development).

Hayot Expertise Advice: For “low added value” support services (HR, IT, Accounting), the OECD authorizes a simplified method with a standard margin of 5%. Use it to simplify your documentation!

If you exceed the thresholds, you must keep two files available:

1. ▸The Master File: It gives an overall vision of the group, its strategy, its intangible assets and its financing policy.
2. ▸The Local File: It is specific to the French entity. It details its intra-group transactions, its functional analysis (functions performed, assets used, risks carried) and the economic analysis of “full competition” (benchmarks).

Intangible assets

The royalty-free transfer of brands or know-how is in the sights of the tax authorities. Conversely, royalties that are too high without real substance (personnel capable of managing the asset) will be adjusted.

Intra-group loans

The interest rate charged must correspond to the rate that the company would have obtained from a bank, taking into account its own credit rating. Pay attention to the limits on interest deductibility (Art. 212 of the CGI).

Management fees

Re-invoicing for management services must be justified by a real service and a consistent distribution key (prorata of turnover, workforce, etc.).

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Transfer pricing management should not be subject to a tax audit. It is a group policy that must be documented “contemporaneously” (as it happens). A clear and justified policy is the best defense against massive adjustments.

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(Official sources: Article 57 of the CGI, Articles L. 13 AA and AB of the LPF, 2022 OECD Principles applicable in 2026, Finance Law for 2024)