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France: Tax-related reporting requirements for online platforms

France: Reporting requirements for online platforms

The current French tax rules include several compliance obligations for online platforms, and there is a proposal to expand the tax-related reporting requirements for online platforms.

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Reporting requirements

According to French tax code, operators of online platforms must submit a user’s activity report:

  • To the users themselves (required since 2016)
  • To the French tax authorities (required since 2019) with data included about users, pursuant to article 242 bis of the EU VAT Directive 2006/112/EC (a directive that is effective in 2021)

The first declaration to the French tax authorities is due before 31 January 2020 (one year before the directive’s reporting obligation effective date). In general, this obligation relates to platform operators and companies wherever established. However, these obligations only apply when users reside in France or when there are sales or services made in France as determined under the value added tax (VAT) rules.

According to annexes of the French tax law, reports provided to the French tax authorities by online platforms must include:

  • Information about its own identification elements (e.g., the online platform’s name, establishment address, VAT number, etc.)
  • The identification elements of the users if private individuals (name, identification or tax number, address, etc.) or if a business (the business’s name, place of establishment, VAT number, etc.)

In addition, online platforms must provide the amount of transactions conducted by these users, wherever established.

The determination of the type of user (that is, whether individuals or businesses) is the sole responsibility of the user. At the time the law was enacted, this was a limited obligation, and did not involve online platforms in the processing of data related to the transactions for which they are intermediaries. However, in order to determine if the platform should communicate these elements to the user and to the French tax authorities, the platform must determine if: (1) the user resides in France; or (2) if the user makes sales or services that are taxable in France for VAT purposes. In this respect, the platforms have an active role in determining whether the user is conducting transactions that are within the scope of French VAT. 

Proposed expansion of reporting requirements

Following communications of the French government in the context of addressing VAT fraud, a draft decree proposed to expand the scope of data that online platforms must communicate to the French tax authorities.  Specifically, the expanded reporting obligations would require online platforms to determine the French VAT-able turnover relating to transactions engaged in the users of the online platforms (in other words, platforms would have to communicate to the tax authorities the amount of taxable turnover of users’ transactions subject to French VAT). This would heighten a platform's administrative liability, and could impose greater administrative and technical burdens in determining the location of each of the operations conducted on the platform.

This means that it is no longer just a question of transmitting data stored into the platform's databases, but of determining the applicable VAT rules and generated its own data. The aim is to actively integrate the platform in process to address VAT fraud (the platforms thus would no longer be passive actors through data transmission).

This administrative burden could be difficult in certain instances—for example, with regard to remote or distance sales situations when the platform is not able to determine if the business users exceeded the turnover threshold (i.e., between €35,000 and €100,000 in the EU).

As well as providing certain clerical clarifications and changes, the draft proposal implies a communication of new data such as the user's webpage link or, failing that, its online ID and trade name on the platform.

Under the proposal, a failure to comply with the new rules could be subject to a penalty equal to 5% of the undeclared sums.

First step towards joint and several liability

In order to avoid the application of any penalties, some platforms could be willing after a first, quick review to provide broader data and information (e.g., users not included within the scope or turnover that in principle should not have been subject to French VAT). However, the determination of this “turnover subject to VAT” will be of a crucial importance for the joint and several liability rules in France that will be applicable beginning January 2020 (i.e., related to the report provided in 2021 by online platforms). As a reminder, joint and several liability implies that the platform would be liable for the payment of VAT when the user has made repeated VAT violations but has not been targeted by the platform’s processes although the user has been identified by the French tax authorities. In this context, the determination of the turnover relating to transactions subject to French VAT will be critical because the platform will increase its VAT risk by providing overestimated figures.

In the meantime, note that platforms will have a similar and extensive role in the reform of remote or distance sales in 2021 (i.e., the platform will be  liable for VAT on some sales such as intra-EU distance sales by companies established outside EU or distance sales of low-value imported goods).

KPMG observation

The proposals in the draft decree imply that online platforms communicate data determined by themselves. In this respect, platforms would need to take an active role in the determination of the VAT applicable to every transaction and to the determination of the turnover that should be reported to the tax authorities. In turn, this implies a heavy administrative burden for platform operators and potentially may require some planning to extract precise data.

What’s next? It depends whether the draft decree is modified to reduce what may be viewed as an excessive administrative burden on platforms that conduct intermediation activities as opposed to platforms that conduct resale/purchasing activities.

 

For more information, contact a tax professional with KPMG Tax Advocats in France:

Laurent Chetcuti | +33 1 55 68 48 87 | laurentchetcuti@kpmgavocats.fr

Anne-Laure Benoist | +33 1 55 68 49 64 | anne-laurebenoist@kpmgavocats.fr  

 

Read an August 2019 report [PDF 135 KB] prepared by the KPMG member firm in France

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