A French Digital Services Tax (DST) has been definitively adopted by the French parliament, and will apply retroactively from 1 January 2019.
The introduction of the “GAFA” tax was announced by Bruno Le Maire, Minister of The Economy and Finance on 6 December 2018.
On 24 July 2019, President Macron signed the legislation creating the GAFA tax on digital services, largely inspired by the EU Directive for which no consensus was found.
The DST should be temporary, while waiting for a long-term and coordinated solution by OECD members. Multilateral negotiations are progressing and an agreement could be reached by 2020.
The following services are subject to the DST:
The Law excludes from the scope the following services:
Based on the text, the tax should not be targeted at providers of streaming video services or on-demand music services, as well as mail or payment service, when they are paid-for services.
The taxable services are deemed to be made or supplied in France when:
A user of a digital interface is located in France if he/she visits that interface through a terminal located in France. The latest version of the Law specifies that location in France is determined by any means, including the IP (internet Protocol) address.
Taxpayers are defined as French and foreign companies for which the annual sums received in consideration for taxable services cumulatively exceed both of the following thresholds:
Thresholds are assessed at group level for groups for which the obligation to file consolidated financial statements applies (companies linked by a control relationship as defined by II of Article L.233-16 of the French Business Code).
The tax base includes all worldwide revenues (i.e. gross revenues) received by the taxpayer (excluding Value Added Tax) for taxable services, multiplied by a percentage representing the proportion of taxable services to be made or supplied in France.
The tax rate is fixed at 3%.
The tax will have to be declared in the annex of the CA3 French VAT return:
From 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, the tax due for 2019 will be the subject of a single deposit payable in November 2019 on the basis of the 2018 revenue derived from in-scope activities.
The text also provides for:
The tax would be deductible for corporate income tax purposes in France.