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29. Google Amazon Facebook : the French #GAFA tax. French administration’s commentaries in part now open for public comment until November

November 2nd 2019

Article 1 of the loi 2019-759 pf 24th July,  2019 instituted a tax on digital serviced known as the « GAFA  Gafa ») payable by the largest digital service operators.  France has forged ahead with a turnover tax  orientated approach, whilst Europe consolidates its overall doctrinal framework. Note that the tax is due on the first remunerated click, but is only payable when a certain level of turnover is reached.

However, the point that appears to be escaping most operators is that there is already a prepayment or acompte of the tax due in November 2019, based upon the chargeable turnover for "clicks" in 2018. See the derogation to article 1693 quater CGI:

"III.-Par dérogation au I de l'article 1693 quater du code général des impôts, la taxe prévue à l'article 299 du même code due au titre de l'année 2019 donne lieu au paiement d'un acompte unique, acquitté dans les conditions suivantes :
1° Pour les redevables de la taxe sur la valeur ajoutée soumis au régime réel normal d'imposition mentionné au 2 de l'article 287 dudit code, lors du dépôt de l'annexe à la déclaration mentionnée au 1 du même article 287 déposée au titre du mois d'octobre ;
2° Dans les autres cas, au plus tard le 25 novembre, lors du dépôt de l'annexe à la déclaration prévue au même 1 déposée auprès du service de recouvrement dont relève le siège ou le principal établissement du redevable.
Cet acompte est égal au montant de la taxe qui aurait été liquidée sur la base des sommes encaissées en 2018 en contrepartie du ou des services taxables fournis en France. Le pourcentage représentatif de la part des services rattachés à la France défini au IV de l'article 299 bis du même code est évalué lors de la période comprise entre le lendemain de la publication de la présente loi et le 31 octobre 2019. L'acompte est dû par les personnes pour lesquelles sont dépassés les seuils mentionnés au III de l'article 299 du code général des impôts, déterminés à partir de ces mêmes sommes et de ce même pourcentage, sans préjudice de son remboursement lorsqu'il est constaté que les conditions d'assujettissement ne sont pas remplies.
Pour l'assujettissement et la liquidation de la taxe prévue à l'article 299 du même code due au titre de l'année 2019, le pourcentage représentatif de la part des services rattachés à la France défini au IV de l'article 299 bis dudit code est évalué lors de la période comprise entre le lendemain de la publication de la présente loi et le 31 décembre 2019.
IV.-L'option prévue à l'article 1693 quater B du code général des impôts peut, pour la taxe prévue à l'article 299 du même code due au titre de l'année 2019, être exercée jusqu'au 31 octobre 2019 et prend effet à partir du premier paiement à compter de cette date."

In other words, a non EU GAFA only has until 25th November, 2019 to appoint a Fiscal representative, pay the acompte or prepayment, and file the necessary return based upon the tax base for 2018. Note that the percentage of pro rata depends upon the proportion of French source "clicks" to Worldwide "clicks" between 30th July and 29th October, 2019.

It is therefore essential to take advice on this promptly.

Article 299 quater CGI sets the rate of the tax at 3%.

The French administration has now published in the Bofip of 16th Octobre 2019, under reference BOI-TCA-TSN, BOI-TCA-TSN-20 et BOI-TCA-TSN-30, up to 29th November 2019 inclusive, its partial commentaries on the tax.

These concern the accounting requirements and the necessarily linked declarative requirements.

For the larger operators there are rules on the allocation of the tax base within a consolidated group. Please note that the French have a very clear idea of international tax consolidation and its declarative requirements having had a régime known as bénéfice consolidé for foreign and domestic subsidiaries in addition to the domestic integration fiscal,   and a separate benefice mondial for permanent establishments extending their territorially restricted  impôt sur les sociétés.

However, as the tax is treated as a turnover tax, and is to be administered by the same service that deals with intra EU VAT matters, It would be unwise to assume that this is any way similar to a Unitary tax, even though the tax basis is prorated according to the French digital activity recorded as against entity or group turnover worldwide. The civil servant drafting the framework has evidently been looking at Google Analytics to check that the information required is not only available but able to be compartmentalised.

The commentaries also concern the recovery of the GAFA Tax, its audit and assessment and inevitably, contentious procedures.

It is clear that the French administration anticipates being able to tax European "GAFAs", as much as their American counterparts, as the tax is placed squarely within the EU Turnover tax type category, and will therefore attempt to use the tax information and tax recovery provisions within the EU and the EEA.

Non EU or non-EEA States, for example the UK post-Brexit, will be required to appoint a fiscal representative in France of a similar nature to a TVA  representative. EEA Members Norway and Iceland will be dispensed from that as their Tax Treaties with France contain suitable information gathering and recovery mechanisms.

However, the administrative commentaries on the taxes  its scope of application, its tax point (fait générateur), its due dates, the tax base and its payment will be included in a later publication.

Those concerned can make representations to the administration at a given e-mail address before 29thNovember, 2019 inclusive.

The main point to note is that the tax will be recovered for year N by two acomptes or prepayments in year N, followed by a regularisation process in the declaration made in year N+1 which will detail and finalise the actual flows during the year N declared.

I will also be happy to assist the service providers concerned in advising on and making any representations needed I the technical French needed.  There will be a major issue as to the definition of common terminology between English and French, and other languages  and the extent of the tax obligations which tend to slip through any attempt at uninitiated translation.

It is likely that Accountancy firms and auditors will need some assistance in this, particularly in grouping worldwide digital turnover in the various areas affected.

I stress that I have worked in a French multinational's head office tax department charged with dealing with the group's benefice consolidé, and also with the Renault VAT declaration.

An executive summary of the tax can be obtained by request from the e-mail below, there will be a small fee.

Peter Harris


(+44) (0) 1534 625879