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BEPS

France: Senate and National Assembly Commission Reaches Agreement on Digital Services Tax Legislation

Robert Sledz  

Robert Sledz  

On June 26, 2019, the joint commission appointed by the French Senate and National Assembly published Text No. 616, containing the commission’s compromise agreement on the digital services tax (DST) legislation passed by each legislative chamber (as discussed in the section below).

Editor’s Note: According to the legislative history, the joint commission was formed on May 23, 2019.

The corresponding Senate press release says the compromise text retains several Senate amendments from the latter’s first reading, including the requirement in Article 1bisA for the French Ministry of Finance to inform the French legislatures why it feels it does not have to obtain a ruling from the European Commission on whether the pending DST may constitute EU state aid.

The French DST would apply at a 3% rate on certain taxable services provided by digital companies if, during the preceding calendar year, the company’s global revenue and amount for digital services provided in France exceeds €750 million and €25 million, respectively, in a new Article 299 of the French Tax Code.

Legislative History

On March 6, 2019, following several announcements over the past three months on a proposed DST, French Finance Minister Bruno Le Maire released the framework of a proposed DST (the “Bill on the Taxation of Large Digital Companies”). Even though Mr. Le Marie previously floated a five percent DST, the framework contained a three percent rate, which would apply – retroactively from January 1, 2019 – to multinationals whose annual global revenue is at least €750 million, and €25 million or more in France each year, until a global solution is reached by the OECD.

Despite its joint proposal with Germany during the monthly ECOFIN meeting on December 4, 2018 to water down the DST proposed by the EC on March 21, 2018 to cover only online advertising revenues, the March 6th French framework would target all of the EC’s proposed activities:

  • The sale of online advertising space.
  • Online intermediary services.
  • Transfers of user-related data gathered from digital platforms.

The following activities would be excluded from the French tax:

  • The direct sale of goods and services, including digital content.
  • Messaging or payment services.
  • Advertising services, for which advertising messages are determined solely based on the content of the website and are the same for all online users.
  • The sale of data that is not collected online, or that is collected for non-advertising purposes.
  • Regulated financial services.

The French framework expects the new tax to generate €500 million each year in tax revenue, which would be “… declared and paid on the same terms as the [French] VAT…” each April. Companies subject to French corporate income tax could deduct the new tax from their corporate tax base.

On April 10, 2019, the French Senate (upper house of Parliament) began its first reading of Project Law No. 452 that would introduce a DST, following the National Assembly’s (lower house) adoption of its own version (Project Law No. 1737 of March 6th).

On May 15, 2019, the Senate Finance Committee released a further amended version of the DST legislation (Law Project No. 497).

On May 21, 2019, the Senate adopted Project Law No. 497, containing minor amendments to the National Assembly’s version (i.e., Project Law No. 1737 of March 6th).

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