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France - Digital Services Tax

Are there rules for taxing digital services

The tax was suspended, but since no agreement has been reached at the OECD on the taxation of the digital economy, the Minister of  Economy announced that France would apply the Digital services Tax as from December 2020.

Applicable date

01/12/2020

Nature of tax

Digital Services Tax.

Tax rate

3%.

Affected business models/in-scope activities

Social networks; Search engines; Intermediaries (e.g. online selling platforms); Digital services; File sharing; Online retailers; Online content.

Revenue stream in scope

The scope includes "the supply, by electronic means, of a digital interface that allows users to contact and interact with other users, including for the delivery of goods or services directly between those users" (such as online marketplaces) and "services provided to advertisers or their agents enabling them to purchase advertising space located on a digital interface accessible by electronic means in order to display targeted advertisements to users located in France, based on data provided by such users".

In scope of tax treaties?

No.

Thresholds / de-minimis

Any companies with Worldwide revenues of at least EUR 750 million and French local revenues of at least EUR 25 million. Currently anticipated that French resident Companies and Non-resident Companies with/without a French permanent establishment will be in scope (e.g. Non-resident entities with French local revenues would be in scope).

Deduction or credit for recipient (DST only)

The tax should be tax deductible from CIT (for taxpayers which pay CIT in France). Moreover, the tax should not fall within the scope of the Double tax treaties even if there are legal uncertainties on this point. Thus, foreign companies (without French PE) should be subject to the tax.

Exemptions

No.

Revenue or profits based tax

All worldwide revenues (i.e. gross revenues) received by the taxpayer (excluding Value Added Tax) for taxable services multiplied by a percentage representative of taxable services to be made or supplied in France. This percentage is evaluated for each service on an annual digital presence basis in France.

Revenue in scope

Revenues from sales / services to local businesses.

Revenue from sales / services to local consumers/users.

Who do these rules apply to

Any companies with Worldwide revenues of at least €750m and French local revenues of at least €25m. Currently anticipated that French resident Companies and Non-resident Companies with/without a French permanent establishment will be in scope (e.g. Non-resident entities with French local revenues would be in scope).

Reporting / Compliance obligations

The Government has agreed to defer the payment of the tax for 2020 until the end of the year.The tax will have to be declared in the annex of the French VAT return (CA3):  

• For companies liable to pay VAT under the normal real regime, simultaneously with the CA3 VAT return filed in respect of March or the first quarter of the year following the one during which the tax became payable (at the same as time as the CA12 return for companies under the simplified regime); 

• For companies not liable to pay VAT in France, at the latest on 25 April of the year following the one during which the tax became payable. 
As of 2020, taxpayers subject to the normal VAT regime will also have to pay the tax in two instalments; the sum must be at least equal to the amount due for the previous financial year. 
In accordance with the calendar defined for 2019 by the Law, the tax due for 2019 will be the subject of a single instalment payable in November 2019 on the basis of the 2018 revenue deriving from in-scope activities. 
In addition, under some conditions, the Law allows companies to opt for a single tax return and payment at the group level. The option is valid for three years. For the tax due for the year 2019, this option must be exercised by 31 October 2019.
The law also provides for:

• an obligation for the taxpayers to keep, in support of their accounting, information on the amounts collected monthly in consideration for each of the taxable services provided, by distinguishing between those relating to a service provided in France and abroad and, where applicable, those excluded from the base, as well as the monthly quantitative elements used to calculate the percentages representing the share of taxable services connected with France

• the implementation of a specific procedure allowing the French tax authorities to ask entities liable to the tax for justifications on all the elements used as a basis for calculating this tax, apart from any tax audit.

From 1 July 2019 there are additional reporting obligations for online platforms to provide information to the FTA on an annual basis. These reporting obligations apply to Resident individuals and companies, and may potentially apply to non-resident companies with or without a permanent establishment in France.

OECD membership

Yes.

As at

27/05/2021

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