France Issues Draft Guidance on New Digital Services Tax

On July 25, 2019, the French Digital Services Tax (DST) was signed into law and is effective retroactively from January 1, 2019, with the first payment due on October 25, 2019. For a discussion of the law itself, we refer to our earlier Transfer Pricing Times article. To avoid repetition, a discussion of the law and its scope is omitted here.

On October 17, 2019, just one week before the first payment was due, the French General Directorate of Public Finance has published draft guidance (available here) on the new DST for consultation. The deadline for submission of any comments is November 29, 2019.

The draft guidance includes three sections:

• The scope and payment of the tax (Title 1, BOI-TCA-TSN-10, in preparation);
• Reporting and accounting obligations, collection, control and litigation (Title 2, BOI-TCA-TSN-20); and
• The consolidation regime within the reporting and payment group (Title 3, BOI-TCA-TSN-30).

There is a lot of focus on reporting and payment procedures for the DST. Additionally, options for consolidating the reporting and payment within a Group of companies are outlined. The draft guidance also includes certain technical details such as how companies are expected to calculate their French user base. Furthermore, it confirms that the sale of electricity, alcohol and alcoholic beverages and tobacco products will be exempt from the tax, even if these products are sold through an online marketplace.

Nevertheless, many details (such as a clear definition of the scope of the tax) still remain unclear and tax payers are left with significant uncertainty when trying to establish a reasonable filing position. It is also noteworthy that the current publication is only a consulting draft and the final guidance may well look different. 

Read Transfer Pricing Times – October 2019