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France: Basis for local taxation (CVAE) includes transfer pricing re-assessments

France: Local taxation, transfer pricing re-assessments

The French Supreme Tax Court (“Conseil d’État”) held that the French tax authorities can consider income that is not “booked” in the accounts of the taxpayer-company for purposes of determining a tax on added value (“Cotisation sur la Valeur Ajoutée”—CVAE). In this case, the amount at issue related to a transfer pricing re-assessment.


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The case identifying number is: No. 409645 (6 June 2018)

The case is available on the Conseil d’État website (in French).


The CVAE is a tax levied on enterprises at the national level, but for the benefit of local councils. The CVAE tax liability is equal to a certain percentage (in general 1.5%, but less for those enterprises with gross revenues below €50 million) of the added value produced by enterprises. The added value is based on the accounts of the enterprise.

In general, re-assessments relating to the CVAE (which typically for corporate tax purposes, is a deductible tax) relate to the last three years under the statute of limitations for re-assessments.

Judgment of the Conseil d’État

The Conseil d’État held that application of the CVAE rules does not prevent the tax authorities from questioning the amounts declared with respect to the added value production for the year at issue or with respect to the acquisitions of goods and services from third parties. In other words, if required by circumstances, the tax authorities may question the legitimacy of an accounting entry and, if warranted, can adjust the added value of the enterprise to reflect those amounts or sums that either would be regarded as income not properly accounted for or not wholly or partly regarded as purchases or consumptions.

KPMG observation

Tax professionals have observed that the Conseil d’État, in this case, has gone further than it did in a previous decision of 18 June 2012 (the Fromageries des Chaumes case) in which the court only considered that an expense considered to be non-deductible further to a transfer pricing re-assessment was not deductible for purposes of the computation of the added value used for determining the basis of the CVAE.

As a consequence, transfer pricing re-assessments affect not only the corporate tax basis of the enterprises but also the basis for the CVAE liability—resulting in additional costs that, in some instances, could be substantial.


For more information, contact a tax professional with Fidal* in France or with the KPMG member firm in France: 

Gilles Galinier-Warrain |+33 1 55681654 |

Patrick Seroin | + 33 (0) 1 5568 4802 |

* Fidal is a French law firm that is independent from KPMG and its member firms.

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