In recent years, a growing number of countries have enacted tax rules that require multinational enterprises (MNEs) to document their intra-firm trade prices and show that they are set as in third-party trade. The objective of these rules is to limit opportunities for strategic trade mis-pricing and profit shifting to lower-tax affiliates. In this paper, we study the regulations' fiscal and real effects. Testing ground is the introduction of transfer pricing (TP) documentation rules in France in 2010. Drawing on rich firm-level data, we show that affected MNEs reduced their outward profit shifting from France, while simultaneously lowering real investments in the country. Outside of France, treated MNEs decreased their real economic activity at low-tax (but not at high-tax) group locations
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