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U.S. House Members Ask Treasury to Address Pending French Digital Services Tax

Robert Sledz  

· 5 minute read

Robert Sledz  

· 5 minute read

On June 19, 2019, two members of the U.S. House Way and Means Committee – Suzan DelBene (D-WA) and Darin LaHood (R-IL) – sent a letter to Treasury Secretary Steven Mnuchin and Trade Ambassador Robert Lighthizer, requesting that they address the pending French digital services tax (DST), discussed below.

The Representatives said that the DST would cause double taxation, in contravention of the U.S. income tax treaty with France, and would “disproportionately affect U.S. technology exporters by setting a threshold that effectively carves out all French competitors.”


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). 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.

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).

Editor’s Note: According to the legislative history, a joint commission was formed on May 23, 2019 to review the DST versions adopted the Senate and National Assembly, in order to generate one version.

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