TP documentation & Tax havens black and grey lists

?????? On 14 February 2023, the Council of Europe amended its European tax havens blacklist (previously updated on 4 October 2022) to include the British Virgin Islands, Costa Rica, the Marshall Islands and Russia.

The grey list has also been modified as 7 States have been removed: Barbados, Jamaica, North Macedonia, Uruguay, Russia, British Virgin Islands, Costa Rica (the last three being transferred to the blacklist). Finally, 3 States are added to this list: Albania, Aruba and Cura?ao.

?? This new list is likely to impact the #TransferPricing documentation of MNEs. Indeed, in the context of the enhanced documentation obligations provided for in the French Book of Tax Procedures (LPF), when transactions are carried out with one or more associated enterprises established in a blacklisted territory enhanced documentation is mandatory.

? As provided for in Article 238-0 A, 2bis, of the French Tax Code (CGI), the EU list of uncooperative countries and territories for tax purposes is added to the list of uncooperative states and territories (ETNC) published by the Minister of the Economy. It should therefore be understood that as of 14 February 2023, 16 jurisdictions are covered by this reinforced documentation.

?? The latter may thus lead to more complexity for companies that have not foreseen it, as TP documentation must be provided to the French tax authorities in the event of a tax audit.

?? However, if the TP documentation is not complete or does not correspond to a reinforced documentation, or even if it is missing, the fine can reach up to 0.5% of the amount of the transactions regarding or 5% of the amount of the reassessment. In any case, the fine cannot be less than €10,000.

Written by Frederic BARAT and Guillaume Mélot