France reviews new taxes on non-resident Internet traders

Wed 26th Dec 2012

Following continual scrutiny of tax avoidance by multinationals, France is review the potential to introduce additional taxes on e-commerce being provided to French consumers.

As a member of the European Union, France charges VAT on multinationals selling goods from abroad to French non-tax registered individuals.  This is subject to a Euro 100,000 per annum French e-commerce distance selling VAT registration threshold.  In addition, digital services providers, such as Google and Facebook, are able to provide online services to French consumers but recognise the income in other European jurisdictions.

Hard-pressed governments are seeking this ability of multinationals to trade in their countries without a residency status as a route to avoid other, direct taxes – notably corporation taxes.  The French government is therefore reviewing two alternative options:

  1. Taxing non-resident digital traders based on the number of subscribers to the site; or
  2. Renegotiating existing tax treaties with other countries to enable France to levy direct tax on supplies of goods or services made to local individuals

It would be challenging to reset any double taxation agreements internationally, particularly without the cooperation of the EU.  The proposals are to presented to the French government in January.

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