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25. The Google fine and taxation of a total of €1 Billion

September 13th 2019

This article will be updated as more details become available:

Subject Google and digital taxation in France for non-resident individuals and companies. Shifting sads or shifting structures?

The Cour d'appel de Paris published a communiqué on 12th September, 2019 stating that Google France Sarl and Googe (Ireland) Limited had accepted to pay a public interest fine of 500 million Euros, It did not mention the assessed tax of €500 million accepted as outstanding for the years 2012-2014, as the announcement concerned only the payment of the criminal anti-evasion charge.

Whilst Google used the opportunity to avoid being held criminally liable, as the new procedure does not involve an admission of criminal liability, the fact that it got that far shows that the Parquet and the DGFIP mean business, and that they are prepared to use the procedure to fill the coffers with value added which otherwise elude, rather than avoid  taxation.

That should alert anyone working in France through the internet on a cross-border basis that their systems need a criminal compliance check.

The Convention will be published on the French anti-corruption site within 10 days, in other words by 22 September.

As the issue involved an analysis of the French concept of "établissement stable" in the context of internet, the ramifications for those companies, partnerships  and individuals working from France on the internet will be significant.

The assessment and fine only concern the tax years 2012 to 2014, and presumably unless Google adjusted its fiscal structure and behaviour pattern, there may be further assessments.    Note that an Sarl is a société de personnes and not a limited company as that is understood in the UK.

Its therefore essential that those using the internet to work in France make sure that their system is cleared not just for tax but also criminal inspection, and therefore legal. Whilst the Tax administration can decide that the tax law has not been infringed, if it does not, then the Parquet will be involved.

Whilst the French tax administration and the Parquet Financier experienced  difficulties in functioning together effectively, Mme Houlette has put a singular amount of effort into easing the systemic conflicts between the penal system and the tax systems of investigation of the facts. That has resulted in a significant addition  to the French budget.

The Parquet's attempt for example to hold the Wildenstein family up as an example failed, as the law did not admit any of the facts to be classed as criminal at the time of their being done. The lesson of alleging mens rea without actus reus has been learnt. That time is now past.

The notion of permanent establishment in internet issues is therefore now very much on the table and Channel Island businesses need to take advice when working with France so as to be able to demonstrate that they do not have a permanent establishment, for example,  through simple internet transaction of Directors or managers working from France, or by orders or services  processed through the internet when there is a French entity or establishment within the same group or beneficial ownership.

Whilst the French admionstratio failed to prove before the Cour d'appe administratif earlier in the year, see link below, that Google Frane sarl was not providing a permanet establishmùent factility to Google Ireled limited in years up to 2010, the underlyoing facts and the law appear to have chenged for years 2012-2014.

Commuiniqué du Cour d'appel administrative de Paris du 25 avril 2019.

More anon.

13th September, 2019