Transfer pricing
The prices at which transactions — goods, services, loans, IP licences — are conducted between related entities of the same group located in different countries. They must comply with the arm’s-length principle to be accepted by tax authorities.
In practice
Transfer pricing is the preferred ground for cross-border tax audits. A group billing brand royalties from France to an Irish IpCo must document that the rate corresponds to what independent parties would have negotiated. Mandatory documentation under French tax code articles L13 AA and AB applies to groups exceeding 400 M€ in consolidated revenue, but vigilance is warranted from 10 M€ of intra-group flows. Inadequate documentation triggers a 10,000 euro fine per accounting period.