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1 November 2019

Taxing Tech – 1 of 5 Insights

French Digital Services Tax


The Organisation for Economic Co-operation and Development (OECD) has been working for several years on a major reform of international taxation to address these new forms of trade organisation. However, it is difficult to reach a consensus because of the discrepancies between States and in particular the opposition of the United States, which was initially reluctant to make progress in this area. A similar lack of consensus appears at EU level.

In anticipation of the agreement expected to be reached at the OECD in 2020, France has decided to immediately introduce its own Digital Services Tax (FDST) to allow greater participation of large digital companies in public finances. On 24 July, the law implementing the long awaited FDST entered into force. Its main objective is to update international tax rules that are not suited for companies operating in the digital sector.

Scope of the tax

Pursuant to Article 299 of the French Tax Code, the FDST will apply to two categories of services, namely:

  • Interfacing services: the supply of a digital interface that allows users, individuals or professionals, to contact and interact with other users, including for the delivery of goods or services between those users.
  • Advertising services: services provided to advertisers enabling them to purchase advertising space located on a digital interface in order to display targeted advertisements to users located in France, based on data provided by such users (eg keywords used in a search engine).

However, certain services are explicitly excluded from the scope of this tax (eg the delivery of digital content and communication, payment and intercompany services).

Thresholds for in-scope services

Entities (whether a French tax resident entity or not) subject to FDST include those whose annual turnover received in consideration for Taxable Services cumulatively exceeds:

  • €750m ($844m) worldwide
  • €25m ($28m) in France.

If a company does not exceed both thresholds, it is not subject to the FDST.

From a practical standpoint, based on a report prepared by an accounting firm, the companies subject to the tax would be (in alphabetical order):

  • Alibaba
  • Amadeus
  • Amazon
  • Apple
  • Axel Springer
  • Booking
  • Criteo
  • eBay
  • Expedia
  • Facebook
  • Google
  • Groupon
  • Match.com
  • Microsoft
  • Rakuten
  • Randstad
  • Recruit
  • Sabre
  • Schibsted
  • Travelport Worldwide
  • TripAdvisor
  • Twitter
  • Uber
  • Verizon
  • Wish
  • Zalando.

Tax rate and base

The FDST consists of a 3% single rate.

The FDST is based on the amount, excluding value-added tax, of all the sums collected worldwide by the taxpayer in exchange for the provision of Taxable Services, multiplied by the percentage of those services deemed to be made or supplied in France.

The amounts to be taken into consideration are those collected as of 1 January, for the calendar year 2019.


The company (or a group company responsible for paying this tax for the whole group) will have to pay two instalments in April and October of each year with the balance being paid in April of the following year (for example: two instalments in April and October 2020 and the balance in April 2021).

As stated above, companies falling within the scope of the FDST are liable from 2019. For the year 2019 only, a single instalment will be paid in November 2019 and calculated at 50% of the tax that would have been due for the year 2018. The payment of the balance of the tax due for the year 2019 will be paid in April 2020.

Legal uncertainty

At international level, US companies will be the main targets of the FDST since, of the 29 companies falling within its scope, 21 are located in the United States (Source: The French Digital Service Tax, An Economic Impact Assessment, March 22, 2019, TAJ). For this reason, the United States initially announced the opening of an investigation under section 301 of the Trade Act of 1974 to determine whether the FDST could be classed as a discriminatory measure against US companies.

French president Emmanuel Macron announced during the G7 summit held in August, the temporary nature of the FDST, confirming it would disappear from the implementation of a new tax system dealing with digital companies which is expected to be implemented through the OECD in early 2020 at the earliest.

In addition, the amount of FDST paid by digital companies could be partially reimbursed if it is found to be higher than what would have been due under the new tax system driven by the OECD had it applied at the time.

If you have any questions on this article please contact us.

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