With India serving as a hub for IT services, R&D, and manufacturing, and France as a leader in high-value design, technology, and distribution, cross-border dealings between affiliates often involve complex pricing structures.

The India and France transfer pricing agreement aligns closely with the OECD Transfer Pricing Guidelines, but their local documentation standards, audit thresholds, and compliance expectations differ significantly. 

Given the complexity of dual compliance, companies face growing scrutiny over markups, royalty rates, and cost allocations. Using automated transfer pricing benchmarking software, such as Commenda, enables businesses to streamline benchmarking, generate a compliant intercompany agreement between India and France, and maintain audit-ready documentation tailored to both India and France. Let’s find out more about it in this post. 

India to France Transfer Pricing: A Strategic Compliance Priority

As trade between these two economies continues to expand, particularly in pharmaceuticals, technology, automotive, and engineering services, transfer pricing has become a strategic compliance priority for multinational groups.

Key challenges often arise due to:

  • Dual Audits and Double Taxation Risks: Both Indian and French tax authorities conduct rigorous audits and may independently adjust profits, leading to disputes unless transactions are documented per both jurisdictions’ standards.
  • Currency and FX Exposure: Exchange rate fluctuations between the Indian Rupee (INR) and Euro (EUR) can distort profitability margins and benchmarking results if not regularly updated.
  • Differing Documentation Rules: India mandates Local and Master Files under Rule 10D, while France requires the Fichier Principal and Fichier Local following OECD’s BEPS Action 13, each with distinct content and submission timelines.
  • Economic Nexus and Substance Tests: French authorities scrutinize the local presence and economic substance of Indian affiliates, especially where intangible assets or contract R&D functions are involved.

Common India–France Intercompany Structures and TP Methods

Below is a summary table outlining the most common India–France intercompany structures, their typical transfer pricing methods, and key audit considerations:

Intercompany StructureTypical TP MethodDescriptionCommon Audit Risks & Compliance Challenges
Captive IT / R&D Service Center (India)Cost Plus Markup Transfer Pricing Model / TNMMIndian subsidiaries provide R&D or IT services to French parent companies on a cost-plus markup basis.Disputes over cost base inclusions, outdated markups, or lack of evidence for value creation.
Contract Manufacturing (India)Cost Plus MethodIndian manufacturers produce goods exclusively for French entities, with limited entrepreneurial risk.Incorrect risk characterization, undervalued markups, and insufficient comparables.
French Distribution Subsidiary (France)Resale Price Method (RPM)French subsidiaries distribute goods sourced from Indian affiliates, earning a routine gross margin.Misclassification of functional profile (e.g., limited vs. full-risk distributor), transfer of intangibles.
Shared Back-Office / BPO Services (India)TNMMThe Indian entity provides routine accounting, HR, or finance support to the French parent.Benchmarking inaccuracies due to lack of comparable European service providers.
Royalty and IP Licensing ArrangementsCUP / Profit Split MethodIndian or French entities pay royalties for technology, designs, or trademarks.Disallowance of royalty rates, insufficient IP valuation documentation, or mismatch in benefit demonstration.
Intra-group Financing (France → India)CUP / Cost of Funds + SpreadFrench HQ provides loans or guarantees to Indian subsidiaries.Thin capitalization risks, excessive interest rates, missing guarantee fee documentation.
Management and Technical Service FeesCost Plus Method / TNMMThe parent company in France provides strategic or technical support to Indian affiliates.Lack of proof of services rendered, duplication of costs, or allocation methodology disputes.

Benchmarking Requirements Under India’s Transfer Pricing Law

India’s transfer pricing documentation requirements place heavy emphasis on benchmarking analysis and contemporaneous documentation. The Central Board of Direct Taxes (CBDT) ensures that all international transactions between associated enterprises are priced at arm’s length, supported by a robust functional and comparability analysis.

Below is a summary of India’s key benchmarking and documentation obligations:

RequirementThreshold / ApplicabilityDescription
Form 3CEBMandatory for all international transactions between AEsMust be certified by a Chartered Accountant and filed electronically with the income tax return.
Local File (Rule 10D)Applicable to all AEsIncludes detailed benchmarking study, economic analysis, selection of the Most Appropriate Method (MAM), and tested party justification.
Master File (Form 3CEAA / 3CEAB)Consolidated group revenue exceeds ₹500 million (₹100 million in case of intangible related transactions) and aggregate international transactions more than ₹5 billionSummarizes the global group structure, TP policies, intangibles, and intercompany financing.
Country-by-Country Report (CbCR)Consolidated group revenue more than ₹64 billionFiled by the ultimate parent or designated reporting entity, detailing global revenue and tax allocation.
Retention of Documentation8 years from end of relevant assessment yearMandatory for all entities engaged in international transactions.

Preferred Benchmarking Databases and Methods

Indian benchmarking relies primarily on local financial data and region-specific comparables, as required by the Income Tax Department.

  • Common Databases: Prowess, Capitaline, Ace TP, Orbis (secondary source).
  • Accepted TP Methods:
    • TNMM (Transactional Net Margin Method): Most widely used for IT, ITeS, and R&D centers.
    • Cost Plus Method (CPM): Used for captive manufacturing or service setups.
    • CUP (Comparable Uncontrolled Price): For intercompany royalty, IP licensing, or loans.
    • Profit Split Method (PSM): For shared R&D and joint value creation between group entities.
    • Resale Price Method (RPM): For distribution activities in India.

Commenda integrates seamlessly with India’s TP documentation ecosystem, offering built-in templates and benchmarking models aligned with CBDT and OECD standards.

France Transfer Pricing Rules and Documentation Standards

France’s transfer pricing framework is OECD-aligned. The French tax authorities emphasize economic substance, arm’s length principle, and detailed local documentation for transactions between French entities and foreign related parties, including India.

Here are some key components of France’s TP framework:

AspectDetails
Legislative BasisArticle 57 CGI; OECD Transfer Pricing Guidelines; BEPS Action 13 compliance
Documentation Requirements– Fichier Local (Local File): Transaction-specific details, functional and risk analysis, benchmarking studies.
– Fichier Principal (Master File): Overview of global group structure, intangibles, financing arrangements.
– CbCR: Required if consolidated group revenue > €750 million.
Documentation TimelineFichier Local and Master File must be prepared contemporaneously with the fiscal year; CbCR must be filed within 12 months after the fiscal year-end.
Benchmarking and DatabasesUse of French or EU comparables; international databases such as Orbis, Amadeus, and RoyaltyStat are widely accepted for arm’s length studies.
Accepted TP MethodsCUP, RPM, CPM, TNMM, Profit Split Method (PSM) – all OECD-compliant.
Penalties for Non-Compliance– Adjustments to taxable income with interest.
– Possible fines for insufficient documentation (up to €10,000 per document in some cases).
– Withholding tax exposure if non-arm’s length transactions are treated as hidden profit distributions.

By using Commenda, companies conducting India–France intercompany transactions can maintain consistent, defensible documentation, streamline audit readiness, and mitigate penalties across both jurisdictions.

Why Most India–France TP Agreements Fail Audits

Even carefully prepared India–France transfer pricing agreements often face scrutiny or adjustments during tax audits. Understanding common transfer pricing challenges can help mitigate audit risk and maintain compliance.

  • Template Reuse Without Customization: Many companies reuse generic intercompany agreement templates without tailoring them to the specific facts, functions, and risks of India–France transactions. Such templates often fail to reflect actual roles, IP ownership, or cost structures, triggering audit challenges.
  • Missing Critical Clauses: Agreements frequently omit essential provisions, such as:
    • Intellectual Property (IP) ownership and licensing
    • Withholding Tax (WHT) obligations
    • Compliance with India and French local laws
    • Profit split, risk allocation, and service level agreements
  • Outdated or Unsupported Markups: Using historical or arbitrary markups for services, goods, or royalties often fails to meet the arm’s length standard. Both Indian and French authorities require contemporaneous benchmarking with reliable comparables.
  • Insufficient Supporting Documentation: Even when agreements exist, lack of supporting evidence, functional analyses, benchmarking studies, intercompany invoices, can render an agreement non-defensible in an audit.
  • Dual Jurisdiction Misalignment: Failure to synchronize master file and local file thresholds for India and France can lead to inconsistencies that trigger additional scrutiny.

Documentation Requirements: India vs France Compliance Checklist

Here’s a side-by-side comparison of transfer pricing documentation requirements for India and France compliance (or local TP regulation):

AspectIndiaFrance
TP Forms / Documentation– Local File (Rule 10D)      
– Master File (Form 3CEAA / 3CEAB)
– Country-by-Country Report (Form 3CEAD)
– Form 3CEB (CA certification)		– Fichier Local (Local File)
– Fichier Principal (Master File)
– CbCR if consolidated revenue > €750 million
Preferred Databases / BenchmarkingProwess, Capitaline, Ace TP, Orbis (secondary)Orbis, Amadeus, RoyaltyStat, EU comparables
Accepted TP MethodsTNMM, Cost Plus (CPM), CUP, Profit Split (PSM), RPMCUP, RPM, CPM, TNMM, Profit Split Method (OECD-aligned)

Automating Transfer Pricing Compliance with Commenda

Managing intercompany transactions between India and France can be complex due to differing regulatory standards, documentation requirements, and audit expectations. Commenda simplifies this process by offering a fully automated transfer pricing documentation, jurisdiction-specific platform that ensures compliance, reduces manual work, and provides audit-ready documentation for both countries.

  • Localized Benchmarking Engine: Access real-time Indian and EU financial data to calculate arm’s length pricing for services, goods, royalties, and financing transactions. Ensure defensible markups supported by contemporaneous comparables.
  • Agreement Generator with Legal Clauses: Automatically generate intercompany agreements tailored to India and France. Templates include essential clauses for IP ownership, WHT obligations, risk allocation, and compliance with local laws, and can be customized for transaction-specific details.
  • Prebuilt Documentation Packs for Audit Defense: Generate Local File, Master File, Fichier Local, Fichier Principal, and CbCR in one synchronized workflow. Each pack includes functional analysis, benchmarking studies, and audit-ready formatting.
  • Seamless Dual-Jurisdiction Compliance: Synchronize documentation between India and France, avoiding inconsistencies and reducing the risk of audit adjustments or penalties.

Ensure your India–France transfer pricing agreements are accurate, compliant, and audit-ready. Book a demo today and get a transfer pricing consultation from our experts. 

FAQs

1. How do I ensure my India–France intercompany agreement is compliant with both jurisdictions?

Ensure the agreement reflects arm’s length pricing, includes all mandatory clauses (IP, WHT, local law compliance), aligns with Indian Income Tax Act and French CGI Article 57, and is supported by contemporaneous documentation.

2. Can I benchmark transfer pricing using a transfer pricing software?

Yes. Platforms like Commenda use Indian and EU databases (Prowess, Capitaline, Orbis, Amadeus) to perform real-time benchmarking, producing defensible arm’s length pricing efficiently.

3. What documentation is required for transfer pricing compliance in both India and France?

  • India: Local File, Master File, Form 3CEB, CbCR
  • France: Fichier Local (Local File), Fichier Principal (Master File), CbCR (if consolidated revenue > €750 million)

Documentation must include functional analyses, benchmarking studies, intercompany agreements, and transaction-specific financials.

4. What penalties apply in India and France if agreements are not compliant?

  • India: Tax adjustments, penalties up to 2% of transaction value, interest on underpaid taxes
  • France: Adjustments to taxable income, fines for insufficient documentation (up to €10,000 per document), withholding tax exposure

5. What markup is considered acceptable in a Cost Plus model between India and France?

No fixed percentage applies. Acceptable markups are determined by benchmarking studies using comparable transactions in each jurisdiction, supported by contemporaneous documentation.

6. Do I need separate transfer pricing documentation for India and France, or can one solution cover both?

Separate filings may be required for regulatory purposes, but a centralized solution like Commenda can generate synchronized documentation for both countries, ensuring consistency and compliance.

7. How can Commenda help automate transfer pricing compliance between India and France?

Commenda automates compliance by:

  • Providing localized benchmarking using Indian and EU comparables.
  • Generating intercompany agreements with legal clauses for both jurisdictions.
  • Producing audit-ready documentation packs (Local/Master Files, Fichier Local/Principal, CbCR).
  • Maintaining an audit trail and jurisdiction-specific updates to reduce risk and manual effort.