Brands, know-how, patents, customer bases: depending on the sector, intangible assets account for a greater or lesser share of a group’s value. They are decisive in brand-driven industries and research-and-development-intensive groups, but much less so elsewhere. But as soon as they are transferred between related entities, they raise the same questions everywhere: Who is entitled to the profits they generate, and under what conditions are the related cash flows at arm’s length?

These issues are complex, not because intangible assets are entirely outside the scope of market references, but because comparability is particularly challenging in this context. Databases track the royalty rates charged between independent companies, and these are used on a daily basis. However, the assets being compared must be similar in nature, brand recognition, scope of rights, and market.

The OECD devotes Chapter VI of its Transfer Pricing Guidelines to intangible assets; this chapter was extensively revised following the BEPS project and incorporated into the 2022 Guidelines. In France, the basis for tax adjustments remainsArticle 57 of the General Tax Code (CGI). The 2024 Finance Act added a provision specifically dedicated to intangibles: that for intangible assets that are difficult to value, accompanied by an extended carry-forward period of six years.

A key distinction guides the reasoning and structures this guide. In both cases, the analysis starts from the same point: Does the asset create value, and which entities within the group contribute to that creation? But it does not lead to the same question. Making an intangible asset available to a related entity involves determining how to compensate, over time, each of the entities involved for their contributions; the royalty rate paid to the owner is only one component of this balance. Transferring ownership of an intangible asset involves determining a value as of a specific date. The methods, benchmarks, and risks are not the same.

This guide provides an overview of the main rules applicable to intangibles in transfer pricing: what constitutes an intangible for transfer pricing purposes, who is entitled to the profits it generates, how to compensate for its use, how to value its transfer, and what documentation is required under French regulations.

 

I. What Is an Intangible Asset in Transfer Pricing?

 

An independent definition that is broader than accounting and intellectual property law

The first mistake is to base one’s reasoning on the balance sheet. In transfer pricing, the definition of an intangible asset stands on its own: it depends neither on its accounting classification nor on the existence of a registered intellectual property right.

The OECD Principles define an intangible asset as “an asset that is neither tangible nor financial, that may be held or controlled for use in commercial activities, and for which a fee would be charged for its use or transfer if it had taken place in a transaction between independent parties under comparable circumstances”[1].

Three practical implications follow from this definition:

• An intangible asset may not appear on the balance sheet. Research and development or advertising expenses are frequently recognized as expenses rather than capitalized. The resulting intangible asset therefore does not appear anywhere in the financial statements, although this does not prevent it from generating economic value and warranting an arm’s-length return[2].
• Legal protection is not a requirement. Unpatented know-how, a business method, and a customer database constitute intangible assets for transfer pricing purposes even in the absence of a filing or registration. Similarly, the ability to transfer the asset in isolation is not required: certain intangible assets can only be transferred together with other assets[3].
• The decisive test is economic. The question to ask is not “Is this an asset in the accounting or legal sense?” but “Would two independent companies have paid to use or acquire it?” If the answer is yes, compensation is expected within the group.

The Main Categories of Intangible Assets

The OECD Principles provide a series of examples that, while not exhaustive, cover the most common situations: patents, know-how and trade secrets, trademarks, trade names, licenses and administrative concessions, rights arising from contracts (including exclusive distribution rights), as well as goodwill and business value.

The BOFIP adopts a convergent approach when listing the assets to be included in the functional analysis: plants, equipment, patents, know-how, trademarks, and financial assets, taking into account their economic or strategic importance, age, market value, and location[4].

Two elements, however, are frequently mistaken for intangible assets when they are not. Group synergies (streamlined purchasing, integration of information systems, increased bargaining power) produce a real economic benefit, but since they are neither owned nor controlled by a specific entity, they fall under comparability factors rather than intangible assets[5]. The same applies to characteristics specific to a market, which influence the conditions of perfect competition without constituting assets.

Finally, one category deserves special mention at this stage, as it has significant procedural implications under French law: that of intangible assets that are difficult to value, which is the subject of Section IV of this guide.

II. Who Is Entitled to the Profits Derived from Intangible Assets? The DEMPE Analysis

 

This is the core of Chapter VI, and the point on which most of the adjustments are focused.

Legal ownership is not enough

The principle is clearly established: legal ownership of an intangible asset does not, in and of itself, confer any right to retain the profits that the group derives from its use.

Identifying the legal owner and the contractual terms is a necessary first step in the analysis, but it is distinct from the issue of compensation. The return ultimately attributed to the legal owner depends on the functions he performs, the assets he uses, and the risks he assumes, as well as on the contributions made by the other members of the group.

The Principles take this line of reasoning to its logical conclusion: in the case of an internally developed intangible asset, a legal owner who performs no relevant functions, uses no relevant assets, and assumes no relevant risks—but merely holds the title—is not entitled to any share of the returns derived from its use, other than an arm’s-length compensation for the mere holding of the title.[6]

In other words: a holding company that owns the group’s brands but has no team, no decision-making authority, and no risk cannot collect royalties.

The Five DEMPE Functions

The acronym DEMPE encompasses the five categories of functions associated with the lifecycle of an intangible asset:development,enhancement,maintenance,protection, andoperation.

The allocation of profits derived from intangible assets—as well as the related costs and expenses—is carried out by compensating each entity in the group for the functions it performs, the assets it uses, and the risks it assumes in connection with these five functions[7].

In practice, the analysis involves answering a series of specific questions, function by function:

– Development: Who designs it? Who decides on the research program, its budget, and when to end it? Who recruits and leads the teams?

– Improvement: Who is responsible for developing the product, brand, or process? Who decides on product line expansions or repositioning?

– Maintenance: Who bears the costs of upkeep, replacement of inventory, and technical updates?

– Protection: Who monitors counterfeits? Who initiates and funds legal action? Who decides whether to settle?

– Operations: Who handles sales? Who sets prices, the distribution strategy, and the promotional policy?

Financing is not the same as creating value

A clarification is needed regarding the handling of funding, as this is a frequent source of misunderstandings.

When a group entity provides the funds necessary for the development of an intangible asset, two situations must be distinguished. If it merely provides the funds, without any decision-making authority over how the funds are allocated or any control over the risk that the project will fail, its contribution is financial in nature: it is entitled to a return on its investment, structured like that of a lender, and not to a share of the profits generated by the intangible asset. If, on the other hand, it exercises effective control over the development risk—that is, if it decides whether to commit the funds, halt or continue the project based on its interim results, and has the financial capacity to bear the consequences—then it shares in the return on the intangible asset.

The question, then, is not who pays, but who makes the decisions and who actually bears the risk of failure.

How this reasoning applies in France

The BOFIP does not use the acronym DEMPE, but the tax authorities are familiar with it and apply its logic: a properly conducted and documented DEMPE analysis serves as a useful supporting document during an audit, rather than an external line of reasoning that the auditor would be resistant to.

Administrative doctrine expresses the same idea through the concept ofthe “prime contractor,” defined as the company that assumes the primary risks—whether or not they materialize—and makes strategic decisions. The BOFIP specifies that, in general, this company also owns the key intangible assets (trademarks, patents, know-how) and bears the corresponding expenses for research and development, trademark management, and advertising. It is the principal contractor that receives the residual profit once all other entities have been fairly compensated.[8]

The basis for the adjustment remainsArticle 57 of the General Tax Code (CGI), which allows profits indirectly transferred to related foreign companies to be reintegrated into taxable income, “either through an increase or decrease in purchase or sale prices, or by any other means.” The free provision of intangible assets between associated companies expressly falls within the scope of the provision if such provision should have been compensated.[9]

 

III. Making an Intangible Asset Available: What Should Be the Compensation?

 

The first of the two main types of transactions: the owner retains ownership of the asset and grants its use to an affiliated entity.

This raises two questions, in this order. The first concerns value creation: Does the asset provide the licensee with a real economic benefit, and which entities within the group contribute to maintaining and developing that value? This is the DEMPE analysis outlined in the previous section, and it determines everything else. Only then does the second question arise—that of the rate: once it has been determined who contributes what, what royalty should the licensee pay to the owner, and what additional compensation should the other contributors receive?

A royalty that is technically well-calculated but paid to an entity that does not perform any DEMPE functions will not stand up to scrutiny. Conversely, a group that properly compensates each contributor but does not document its rate leaves itself open to challenges regarding comparability.

The Fee and Its Justification

The BOFIP states that the provision of an intangible asset is generally compensated by a royalty calculated as a percentage of revenue, or by a cost-sharing agreement[10].

The justification for the rate is based primarily on an analysis of comparable transactions. Specialized databases track license agreements entered into between independent companies and the royalty rates applied in those agreements. These benchmarks must be used, selecting comparable agreements based on the nature of the licensed asset, the industry sector, the scope of the rights transferred (exclusivity, territory, term), and the relevant market. This analysis must be supplemented by an examination of the economic benefit derived by the licensee and the realistic alternatives available to the licensee.

Two symmetrical pitfalls must be avoided. The first is excessive royalty payments made to an entity that does not perform the DEMPE functions justifying the agreed-upon amount. The second, less intuitive but equally risky, isthe absence of a fee: a French company that makes its intangible assets available to foreign subsidiaries without receiving compensation—even though these intangible assets have significant value and provide a benefit to the subsidiaries—risks being classified as having abnormally waived revenue, which constitutes an indirect transfer of profits[11].

Cost-Sharing Agreements

A cost-sharing agreement allows related companies to share the costs and risks of developing an intangible asset by determining the nature and scope of each participant’s respective interests in the asset thus created[12]. This mechanism, discussed in Chapter VIII of the OECD Principles, assumes that each participant’s contributions are proportional to the expected benefits and that each participant exercises effective control over the risks it assumes.

What methods are used to set the fee?

The OECD Principles specify, for transactions involving intangible assets, the comparable uncontrolled price (CUP) method and the transactional profit-split method[13].

The CUP remains the dominant method in practice. The Principles do acknowledge that identifying perfectly reliable comparables is often difficult when dealing with intangibles[14], and the BOFIP notes that the comparable price method is “unsuitable for transactions involving highly sophisticated products or intangible assets (know-how, patents) ”[15]. These reservations concern the limitations of the approach, not its exclusion: in the absence of a better alternative, the analysis of comparable royalties drawn from specialized databases remains the most commonly used benchmark, provided that the selection criteria and comparability adjustments are carefully documented.

Profit sharing occurs at a later stage. The BOFIP specifies the conditions for this: it is particularly appropriate when the parties make unique, high-value-added contributions—notably intangible assets that meet both of these characteristics; in the case of highly integrated transactions that make it difficult to reliably assess each party’s contribution in isolation; or when significant economic risks are jointly borne[16]. The tax authorities add a caveat taken from the OECD Principles: the absence of closely comparable transactions should not, in and of itself, lead to the adoption of this method.

The characterization of a contribution as “unique and high value-added” is therefore decisive. The OECD Principles reserve this characterization for intangible assets that, on the one hand, are not comparable to those used by the parties to potentially comparable transactions and, on the other hand, are expected to generate future economic benefits greater than those that would be expected in their absence[17].

A recent decision illustrates the strictness with which this condition is assessed. A French distributor of Italian ready-to-wear brands, which the tax authorities accused of promoting the brands without compensation, argued in the alternative that if such a function were attributed to it, its contribution would be unique and high-value-added, such that the net margin method applied by the tax authorities was no longer relevant. The court rejected the argument: providing customer development and brand-building services is not sufficient to confer such a character on a contribution, since the company remained a routine distributor exposed to limited risks and its contribution could be assessed in isolation. Furthermore, the company had not produced any concrete evidence to support the application of the method it was relying on[18].

One final point to note: the techniques for discounting future cash flows, presented in Section IV, are asset valuation tools. They are used to determine a sale price, not to set a royalty rate. Applying them to a licensing issue is a common methodological error.

The Case of the Retailer That Builds Brand Value

One scenario comes up regularly during audits: a French subsidiary distributes the products of a brand owned abroad. On paper, it is classified as a limited-risk distributor and is compensated through a standard margin. In reality, it opens high-end retail locations, funds a network of sales agents, and builds brand awareness in the country.

The OECD Principles distinguish between two situations. A distributor with a long-term exclusive contract may derive benefits from its efforts in the form of its own revenue and market share: in such cases, its efforts have enhanced the value of its own intangible assets, namely its distribution rights. Conversely, when a distributor performs functions, uses assets, or assumes risks that exceed those that an independent distributor with similar rights would bear, an independent distributor would require additional compensation from the brand owner: higher distribution profits resulting from a lower purchase price, a reduction in the royalty rate, or a share of the profits associated with the increase in value.[19]

The Council of State enshrined this analysis in French law in a landmark decision: “Such a practice may consist of insufficient compensation received by a company established in France that incurs expenses contributing to the development of the value of a brand owned by its parent company established outside France.”[20] In this case, the French subsidiary’s salaries and external expenses—including a highly qualified sales staff and prestigious commercial premises—significantly exceeded those of nineteen independent luxury goods distributors, without the resulting increase in gross margin offsetting this difference. A subsequent return to profitability is not sufficient to rule out the benefit: the taxpayer must demonstrate that it received consideration in return[21].

However, this rule does not exempt the administration from conducting a rigorous comparison. In a case decided in May 2026, the reassessment was dismissed even though the circumstances were similar, for two reasons that serve as points of caution: the set of comparables excluded any businesses in the start-up phase, even though one of the brands had just been launched in France; and comparables cannot be substituted from one method to another—a set of comparables based on gross margin cannot be reused to apply a method based on net margin[22].

The BOFIP sets forth a similar principle regarding a foreign manufacturer that entrusts exclusive distribution to its French subsidiary and decides to enter a new market: the subsidiary should not bear the burden of this growth strategy alone, and if it bears all or part of the costs, it is expected to receive compensation in return[23].

In practice, a group whose French subsidiary incurs brand valuation expenses would be well advised to document, in a timely manner, the nature of these expenses, any consideration received in exchange, and the brand’s competitive position in the relevant market.

 

IV. Transferring an Intangible Asset: What Is Its Value?

 

Second type of transaction: ownership of an intangible asset changes hands through a sale, a contribution, or as part of a reorganization. The DEMPE analysis remains the starting point, but here it is used to determine what is actually being transferred and to whom the value accrues, before setting a price on a given date.

Clearly define exactly what is being transferred

Before any valuation can be made, a verification is necessary: Does what is being transferred correspond to what is described in the contract? Does the transfer entail a transfer of functions, assets, and risks, or only a transfer of legal title?

A transfer of title that is not accompanied by an actual transfer of DEMPE functions does not produce the transfer pricing effect that the parties expect: the return will continue to be attributed to the entity that actually performs the functions.

Valuation Methods

When reliable comparable transactions exist, the CUP method is applied. This is particularly the case when an intangible asset acquired from a third party is transferred to a group entity immediately after the acquisition: the price paid to the third party then serves as a direct benchmark.

Failing that, valuation techniques may be used—in particular, income-based techniques—which rely on calculating the present value of future cash flows generated by the use of the intangible asset[24].

Their reliability depends entirely on the parameters chosen, which are the focus of the debate regarding control:

– financial projections: The Principles state that projections prepared for operational planning purposes are generally more reliable than those prepared solely for tax purposes[25]. Consistency with business plans and documents presented to decision-making bodies is therefore crucial;

–the projection horizon: the more intangible assets are expected to generate positive cash flows in the long term, the less reliable the projections are[26];

– the discount rate: intangible assets, particularly those still under development, may be among the riskiest components of the business, a fact that must be reflected in the discount rate selected[27];

– the useful life of the intangible asset and its terminal value;

– tax assumptions and the treatment of depreciation.

The valuation must be dated and consistent with the information available as of the transaction date.

What Case Law Addresses

The Sacla litigation—now known as Coverguard Sales—illustrates the extent of the court’s oversight and the magnitude of the stakes involved. A portfolio of trademarks sold in 2008 to a Luxembourg-based company for 90,000 euros was ultimately valued, following a court-ordered appraisal, at 5,227,495 euros net of the discount, with the 40% surcharge for willful misconduct being upheld.

Three lessons can be drawn from this.

The court established the applicable valuation principle: “The value of a trademark at the time of its acquisition or at the time its rights of use are granted—which depends on the profits that the acquirer of the trademark or its user can expect to derive from its use—must be assessed based on the profit prospects that, as of the date of acquisition, the company could reasonably expect to realize”[28].

It then rejected the historical cost method in favor of discounting future cash flows alone, which was deemed more reliable for assessing a brand’s value in light of the future economic benefits it provides, noting that the historical cost method resulted in a valuation nearly eight times lower.

The debate ultimately focused on the parameters: the revenue base attributable to the transferred trademarks, the excess profit rate attributable to the trademarks set at 3 percent, and a 37 percent discount in connection with a five-year royalty waiver granted by the purchaser. It was, in fact, the calculation of this discount that led the Council of State to overturn the initial appellate ruling.[29]

The Special Case of Intangible Assets That Are Difficult to Value (HTVI)

Certain transfers are subject to a specific regime, introduced into French law by the 2024 Finance Act. This regime applies only to transfers of intangible assets, and not to compensation for their use: a license agreement—even one involving an asset of uncertain value—does not fall within its scope.

What are we talking about?

The OECD Principles definehard-to-value intangibles(HTVI) as intangibles or rights to intangibles for which, at the time of their transfer between related enterprises, two conditions are met: there are no reliable comparables, and the projections of future cash flows or revenues—or the assumptions used for the valuation—are highly uncertain[30].

Typical scenarios include: an intangible asset that is partially developed at the time of the transfer; commercial exploitation expected only several years after the transaction; a new business model with no comparable track record; a transfer in exchange for a lump-sum payment; or an intangible asset developed under a cost-sharing agreement[31]. A classic example is a molecule under development or a technology that has not yet been commercialized.

The provisions of Article 238 bis-0 I ter of the General Tax Code

The 2024 Finance Act incorporated this approach into domestic law. Article 238 bis-0 I ter of the General Tax Code provides that the value of a transferred asset or intangible right may be adjusted based on results subsequent to the fiscal year in which the transaction took place[32].

The tax authorities may therefore use the results actually observed after the transfer to challenge the valuation applied at the time of the transfer. This is a notable exception to the principle that a transfer pricing policy is assessed as of the date it is established.

The Four Exceptions

The text specifies four cases in which the correction does not apply:

1. The taxpayer provides detailed information on the projections used at the time of the transfer, including the methods used to account for reasonably foreseeable risks and events as well as their probability of occurrence, and demonstrates that the significant discrepancy between these projections and the actual results is due either to the occurrence of unforeseeable events or to the occurrence of foreseeable events whose probability had not been significantly underestimated or overestimated;
2. The transfer is covered by a prior bilateral or multilateral pricing agreement in effect for the relevant period between the jurisdictions of the transferor and the transferee;
3. The difference between the valuation based on the initial forecasts and the valuation based on actual results is less than 20%;
4. Five years have elapsed since the year in which the asset first generated revenue from an entity not related to the transferee, and during that period, the difference between forecasts and actual results has been less than 20 percent.

The first exception directly rewards the quality of contemporary documentation: a group that has retained its assumptions, sensitivity analyses, and probabilistic scenarios can circumvent the requirement. The second exception provides a strong argument in favor of bilateral APA when a significant transfer is being considered.

The grace period has been extended to six years

The procedural consequence is significant: for the purposes of Article 238 bis-0 I ter of the General Tax Code, the right to reassess is exercisable until the end of the sixth year following the year for which the tax is due, rather than the general three-year period[33].

These provisions apply to fiscal years beginning on or after January 1, 2024.

 

V. What needs to be documented?

 

Intangible Assets in the Master File

Article L. 13 AA of the LPF requires companies that exceed the thresholds to make a master file and a local file available to the authorities. The master file includes a section dedicated to the group’s intangible assets, divided into four parts[34]:

• The Group’s strategy regarding the development, ownership, and exploitation of intangible assets, including the location of its main research and development facilities and the effective management of these activities. It must identify the entities that own the assets and those that carry out the development work, distinguish between entities that receive royalties and those that use the intangible assets for production, and describe the chosen methods of exploitation.
• A list of intangible assets or categories of intangible assets that are significant for transfer pricing purposes, identifying the entities that are their legal owners. The tax authority specifies that these assets need not be valued individually.
• A list of significant agreements between affiliated companies relating to intangible assets: cost-sharing agreements, major research service agreements, and licensing agreements.
• A description of significant transfers of intangible assets between associated companies, including the countries involved and the corresponding compensation.

Intangible Assets in the Local File

The Local File must indicate whether the company was involved in or affected by corporate reorganizations or transfers of intangible assets during the current fiscal year or the previous fiscal year[35].

The transactions to be described—provided their aggregate amount by category exceeds 100,000 euros—expressly include royalties for patents, trademarks, and know-how, as well as other intellectual property royalties, whether recognized as revenue or as expenses. Acquisitions and disposals of patents, trademarks, or business assets must also be disclosed[36].

The detailed functional analysis required for each category of transactions must include information on the entities that control risks—that is, those that have the authority and actually exercise the function of deciding whether to pursue, avoid, or reject a risk-bearing opportunity, manage the associated risks, and mitigate them[37].

The Enforceability of Documentation

For fiscal years beginning on or after January 1, 2024, when the transfer pricing method actually used differs from the one set forth in the documentation provided to the tax authorities, the difference between the actual result and the amount that would have been achieved had that documentation been followed is deemed to constitute an indirectly transferred profit, unless the corporation demonstrates that no transfer occurred[38].

With regard to intangible assets, this provision has practical implications: a group that documents a 4% royalty policy but actually applies a 2% rate risks an assessment for the difference, with the presumption working against it.

Failure to produce the documentation, or the production of only part of it, after a formal notice has gone unanswered within thirty days, also subjects the party to the fine provided for in Article 1735-ter of the CGI[39].

Key Takeaways

 

Start with value creation, then classify the transaction. In all cases, you must first establish that the asset provides a real economic benefit and identify the group entities that contribute to its value. Only then does the nature of the transaction dictate the method: a provision of services amounts to compensation for contributions, of which the royalty—justified by rates comparable to those between independent companies—is only one component; a transfer of ownership requires a valuation as of a specific date. Confusing these two approaches is the most common methodological error.

The definition is economic, not accounting or legal. An asset that does not appear on the balance sheet and lacks legal protection may well constitute an intangible asset that generates revenue.

Legal ownership does not, in and of itself, confer a right to profit: it is the functions performed, the assets used, and the risks assumed under the DEMPE that determine the allocation of returns. Providing financing without controlling the risk of failure entitles the financier to a return on the financing, not to a share of the return on the intangible asset.

A distributor can enhance a brand’s value without becoming the principal entrepreneur. Insufficient compensation paid by a French company that incurs expenses contributing to the development of the value of a brand owned by its foreign parent company may constitute a practice falling under Article 57 of the General Tax Code (CGI). However, this principle does not exempt the tax authorities from conducting a rigorous comparability analysis.

For an asset transfer, the valuation must be dated and traceable. Projections, discount rates, useful lives: each parameter must be consistent with the information available at the time of the transaction and with the group’s internal documents. A clear undervaluation exposes the entity to a reassessment and a 40% surcharge for willful noncompliance.

The HTVI framework shifts the burden of proof regarding transfers. The government may adjust a valuation based on subsequent results within a six-year recoupment period. The most effective protection is to document projections in detail at the time of the transfer or to secure the transaction through a prior bilateral agreement.

The documentation is enforceable. Any discrepancy between the documented method and the method actually used is presumed to constitute a profit shift.

 

FAQ: Transfer Pricing and Intangible Assets

 

Can an unregistered trademark be considered an intangible asset for transfer pricing purposes?

Yes. Legal protection is not a necessary condition for an asset to qualify as an intangible asset under the OECD Principles. The determining factor is whether independent parties would have paid for the use or transfer of the asset in question under comparable circumstances. Unpatented know-how, a customer database, or a business method may thus constitute intangible assets for which an arm’s-length payment is required.

What is DEMPE analysis?

DEMPE is an acronym for the five functions associated with the life cycle of an intangible asset: development,enhancement,maintenance, protection, and operation. The analysis involves identifying, for each of these functions, which entity within the group actually performs it, what assets it uses, and what risks it controls. It is this analysis—not legal ownership—that determines the allocation of profits derived from the intangible asset.

How should the rate for an intra-group trademark royalty be determined?

Through a comparable analysis. Specialized databases track license agreements entered into between independent companies and the rates charged. The selection must take into account the nature of the asset, the industry, the scope of the rights granted (exclusivity, territory, term), and the market. This analysis is supplemented by an examination of the economic benefit derived by the licensee and the realistic alternatives available to the licensee. Techniques for discounting future cash flows are not the appropriate tool for setting a royalty rate; they are used to value an asset in the event of a transfer.

How do you determine the transfer price of an intangible asset between related entities?

If reliable comparable transactions exist, the CUP method is applied, particularly when the asset has just been acquired from a third party. Otherwise, valuation techniques based on the discounting of future cash flows are used. French case law favors this approach over the historical cost method, which is considered less representative of the future economic benefits provided by the asset. The debate then focuses on the parameters: projections, discount rates, useful life, and any discounts.

Can a company that legally owns the group's trademarks collect royalties?

It may receive these payments, but it may retain them only to the extent that it performs functions, uses assets, and assumes risks under the DEMPE. The OECD Principles state that a legal owner that merely holds title is entitled only to an arm’s-length return for that holding alone. The remainder must be reallocated to the entities that actually create value.

Is a French distribution subsidiary that incurs expenses related to promoting the group's brand at risk of undergoing a restructuring?

Yes, if its compensation does not cover those expenses. The Council of State has ruled that insufficient compensation received by a company established in France—which incurs expenses that contribute to the development of the value of a brand owned by its parent company established outside France—may constitute a practice falling under Article 57 of the General Tax Code (CGI). The tax authorities must, however, establish the benefit through a relevant comparison: a tax assessment was thus dismissed in May 2026 because the set of comparable companies did not include any start-ups, even though one of the brands had just been launched in France.

What is an intangible asset that is difficult to value (HTVI)?

This is an intangible asset for which, at the time of its transfer between related companies, there are no reliable comparables, and projections of future revenues or valuation assumptions are highly uncertain. The provision does not apply to license agreements. Since the 2024 Finance Act, Article 238 bis-0 I ter of the General Tax Code (CGI) allows the tax authorities to adjust the value reported based on the actual results recorded after the transaction, with the adjustment period extended to six years. Four exceptions allow for a waiver of this mechanism, including the provision of detailed information on the initial projections and the transaction being covered by a prior bilateral or multilateral agreement.

What should the transfer pricing documentation for intangibles include?

The master file must describe the group’s strategy regarding the development, ownership, and use of intangible assets; list significant intangible assets and their legal owners; list related intragroup agreements; and describe any significant transfers that have occurred. The local file must describe transactions involving intangible assets exceeding 100,000 euros per category, along with the corresponding functional analysis, including the identification of the entities that control the risks, the method selected, and its justification.

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Article written by Marion Aguilar, a lawyer and founder of TeaPea, a law firm based in Marseille that specializes exclusively in transfer pricing.

Published on September 21, 2026.

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Sources

[1]OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, 2022 edition, Chapter VI, § 6.6.

[2]OECD Principles 2022, Chapter VI, § 6.7.

[3]OECD Principles 2022, Chapter VI, § 6.8.

[4]BOI-BIC-BASE-80-10-10, § 80.

[5]OECD Principles 2022, Chapter VI, §§ 6.30 and 6.31; see also Section D.8 of Chapter I on the treatment of group synergies.

[6]OECD Principles 2022, Chapter VI, § 6.42.

[7]OECD Principles 2022, Chapter VI, § 6.32 and § 6.48.

[8]BOI-BIC-BASE-80-10-10, § 110.

[9]CGI, § 57; BOI-BIC-BASE-80-10-10, § 10.

[10]BOI-BIC-BASE-80-10-10, § 220.

[11]CGI, § 57; BOI-BIC-BASE-80-10-10, § 10.

[12]BOI-BIC-BASE-80-10-10, § 220; OECD Principles 2022, Chapter VIII.

[13]OECD Principles 2022, Chapter VI, § 6.145.

[14]OECD Principles 2022, Chapter VI, § 6.146.

[15]BOI-BIC-BASE-80-10-10, § 150.

[16]BOI-BIC-BASE-80-10-10, § 200.

[17]OECD Principles 2022, Chapter VI, § 6.17.

[18]Paris Administrative Court of Appeal, 9th Chamber, May 18, 2026, No. 24PA03817, Calliope, LLC.

[19]OECD Principles 2022, Chapter VI, § 6.78. Examples 8 through 13 in Annex I to Chapter VI illustrate these principles in the context of marketing and distribution agreements.

[20]Council of State, Joint Sessions of the 9th and 10th Chambers, November 23, 2020, No. 425577, Société Ferragamo France, cited in the Lebon Case Law Digest.

[21]After remand, Paris Administrative Court of Appeal, June 30, 2022, No. 20PA03601; appeal denied by the Council of State, June 30, 2023, No. 467174. See also, for subsequent fiscal years, Paris Administrative Court of Appeal, October 28, 2024, No. 22PA04910.

[22]Paris Administrative Court of Appeal, 2nd Chamber, May 6, 2026, No. 24PA04535, SAS Gap France.

[23]BOI-BIC-BASE-80-10-10, § 100, Example 3.

[24]OECD Principles 2022, Chapter VI, §§ 6.153 and 6.157.

[25]OECD Principles 2022, Chapter VI, § 6.164.

[26]OECD Principles 2022, Chapter VI, § 6.165.

[27]OECD Principles 2022, Chapter VI, § 6.172.

[28]Lyon Administrative Court of Appeal, 2nd Chamber, July 6, 2023, No. 22LY03210, Coverguard Sales (formerly Sacla), para. 15.

[29]Council of State, 9th Chamber, October 27, 2022, No. 457695, Coverguards Sales. Regarding amounts and penalties, Lyon Administrative Court of Appeal, July 6, 2023, cited above, paras. 21 and 23; General Tax Code, Art. 1729, para. a.

[30]OECD Principles 2022, Chapter VI, § 6.189.

[31]OECD Principles 2022, Chapter VI, § 6.190.

[32]CGI, Art. 238 bis-0 I ter, derived from Article 116 of Law No. 2023-1322 of December 29, 2023, on the 2024 Budget; BOI-BIC-BASE-80-10-10, § 232. The applicable definition is that set forth in Article 1649 AH, Section II, E, 2° of the CGI.

[33]LPF, Art. L. 171 B.

[34]BOI-BIC-BASE-80-10-40, §§ 170–220; LPF, Art. L. 13 AA and Art. R. 13 AA-1.

[35]BOI-BIC-BASE-80-10-40, § 330; LPF, Art. L. 13 AA, II, 2, b.

[36]BOI-BIC-BASE-80-10-40, §§ 360 and 370.

[37]BOI-BIC-BASE-80-10-40, § 430.

[38]CGI, § 57, last paragraph; BOI-BIC-BASE-80-10-40, § 585.

[39]CGI, § 1735 ter; BOI-BIC-BASE-80-10-40, §§ 590 and 640.