France: Draft administrative regulations, scope of digital services tax

France: Scope of digital services tax

The French tax authorities on 23 March 2020, released draft guidance (BOI-TCA-TSN-10-20200323 et seq.) on the scope of the digital services tax that was introduced on 25 July 2019 by Law no. 2019-759 (and applies retroactively to digital services revenues as of 1 January 2019).


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Codified, inter alia, under Article 299 of the French tax code, the French digital services tax is imposed at a rate of 3% on annual revenues derived from (1) intermediary services provided through a digital interface and (2) targeted advertising services. The tax only applies with regard to companies with annual revenues from the covered services of at least €750 million on a worldwide basis and €25 million in France. Read TaxNewsFlash

To date, in order to allow the taxpayers to proceed to their first payment in November 2019, only the draft guidance on the filing and payment formalities had been published in October 2019 (BOI-TCA-TSN-20-20191016 and BOI-TCA-TSN-30-20191016). The draft guidance is subject to a public consultation until 23 May 2020, but is binding on the French tax authorities until the publication of final comments.

Clarifications in draft guidance

The draft guidance provides certain clarifications on the scope of the French digital services tax, but does not address certain major open issues and may also give rise to new questions.

In addition to detailing the key concepts already defined by the French digital services tax law and specified during the parliamentary debates, the draft guidance clarifies some open issues that were not resolved or sufficiently detailed at the date of the first advance payment in November 2019. 

Clarification of the notion of “interaction”

Digital intermediation exists when a digital interface is made available, by means of electronic communications, which allows users to contact and interact with each other.

The French tax authorities specified that contact and interaction between users refers to the reciprocal exchange of information between them (publication of content, exchanges, transactions, etc.). It does not matter whether these exchanges are anonymous or impersonal, or whether each user addresses the generality of other users rather than another identified user. In addition, interactions with the operator of the digital interface, including the possibility of contacting the operator, do not constitute interactions between users.

In that respect, the French tax authorities expressly indicate that the publication of announcements by the interface operator (e.g., job postings) does not constitute a digital intermediation service when users only have the possibility to comment on these announcements to the operator without making them available to other users. It may, however, constitute a targeted advertising service according to the French tax authorities.

Non-exhaustive lists of marketplaces and intermediation services

The French tax authorities provided a non-exhaustive list of marketplaces that may qualify as taxable services and that notably includes marketplaces allowing travel agencies to book transport services or issue transport tickets. A non-exhaustive list of intermediation services that notably includes the provision of a digital interface allowing for implementation of the services allowing users to play together is also provided. In that respect, the French tax authorities specify that all online multiplayers games are therefore concerned, regardless of the access mode (by streaming, download, DVD, cartridge, etc.), or all services allowing access to the online multiplayer mode of a game that is not in its basic version.

Details on the scope of targeted advertising services

In addition to specifying the cumulative criteria to characterize a targeted advertising services for French digital services tax purposes (i.e., positioning in the economic chain, placement of advertising messages, targeted nature of the advertising messages), the French tax authorities also provided for an indicative typology of taxable advertising services. In that respect, the draft guidance notably considers that it includes services downstream in the value chain of the programmatic advertising sector that provides technological solutions allowing to:

  • Buy advertising space in real time (demand-side platforms)
  • Technically allow for the dynamic display of advertising messages on these spaces (“ad server” on the demand side)
  • Access data collected from users of digital interfaces in order to target the purchase of advertising space (data management platform)
  • Measure in real time the performance of advertising messages, in particular to verify they are broadcasted on the selected target and actually seen by the internet users (ad verification)

Moreover, in order to capture the full range of targeted advertising services and to give themselves more leeway, the French tax authorities indicate that taxable targeted advertising services also include services that do not fall within the programmatic advertising sector but that meet three criteria:

  • Websites comparing commercial offers, goods or services, as long as they are remunerated by those promoting these offers and that these offers are presented to the user of the digital interface according to data that user has provided
  • Announcements sites or directories, as long as they are remunerated by those publishing these announcements or appearing in these directories and that these announcements are presented to the user of the digital interface according to the data that this user has provided
  •  Any other service that is remunerated by persons for the placement of internet links to sites operated by these persons, provided that these links are presented to the user of the digital interface according to data that this user has provided

Details on rules governing the territoriality of the taxable services

When a taxable service has been identified according to the French digital services tax law, it is necessary to check if these services are “related to” France during the given year. The French tax authorities specify that a taxable service is provided in France if, during the year, at least one user of the digital interface is located in France according to specific rules applying to each of the four sub-categories of taxable digital services.


From a general standpoint, the French tax authorities have provided details on how to establish the location in France of a user. According to the French tax authorities, a user is deemed to be located in France when that user accesses the digital interface from a terminal (e.g., computer, tablet, mobile, etc.) that is itself located in France. The location of the terminal in France is determined by any means, including by its identifier on electronic communications networks, in particular the IP address (internet protocol) or its geo-location data.

Nevertheless, the French tax authorities admit that the location in France can be established by using a bundle of clues with a high level of probability—such as data of the customer account of a digital interface. Thus, the IP address of the user is not the unique criterion. However, according to the French tax authorities, the nationality of the user is never a relevant criterion.

Tolerance measure regarding the monthly conversion rate to be used

In principle, for taxable receipts denominated in a foreign currency other than the euro, the taxpayer must convert them using the exchange rate published in the Official Gazette of the European Union and known on the first day of the month during which the taxable receipts are collected.

In the draft guidelines, the French tax authorities introduced a tolerance measure by which a taxpayer that uses several currencies and converts all of them into the same currency (“common currency”) for accounting purposes, the conversion is deemed made for French digital services tax purpose only if it is performed based on the exchange rate corresponding to the common currency and not the one corresponding to each of the currencies used.

But new questions raised…

The draft guidelines also raise new questions or add some confusion regarding certain concepts. For instance:

  • The French tax authorities narrow the exclusion of intragroup taxable services. When the same service cannot be artificially broken down, the exclusion is assessed globally, without applying this condition only to a fraction of the clients. As a result, when a taxable service is provided, it does not benefit from the exclusion, even if some of the recipient entities are related to the supplier. Therefore, this measure raises the question whether or not it would be possible to exclude intragroup revenues received in instances of mixed services provided to third-party clients and related entities.
  • At this stage, this is not completely clear to which category of taxable services belong the metasearch websites. On one hand, in the section relating to taxable intermediation services, the French tax authorities listed a number of examples and notably the provision of a digital interface providing for implementation of services for publishing advertisements regarding the supply of goods or services and allowing exchanges between sellers and potential buyers when the transaction cannot be concluded through the interface. On the other hand, in the section relating to targeted advertising, the draft guidance indicates that taxable targeted advertising services also include websites comparing commercial offers, goods or services, as long as they are remunerated by the people promoting these offers and that these offers are presented to the user of the digital interface according to data the user has provided.
  • The French tax authorities also revised the tolerance regarding the appointment of a tax representative (as introduced in previous draft guidelines dated on 16 October 2019) with respect to the digital services tax consolidation group. In the prior draft guidelines, the French tax authorities indicated that when the head of the digital services tax group is located in France, the other foreign members of the group did not need to appoint a tax representative located in France. Now, the draft guidance states that the election to the digital services tax consolidation mechanism has no obligation for each of the foreign members of the digital services tax group concerned to appoint a French tax representative. 

Some issues are still open…

At this stage, some issues remain unresolved and are not addressed by the French tax authorities in the draft guidelines. For instance:

  • As regards targeted advertising, the French tax authorities have stated that the French digital presence ratio (i.e., proportionate approach adopted in order to assess the receipts corresponding to taxable services supplied in France) is determined according to the proportion of advertising messages that have been targeted, during a calendar year, to a user located in France. In addition, they have indicated that it does not matter whether the user has actually viewed or clicked on the message, regardless of how the service is paid for. However, this does not address the impact on the French digital presence ratio of de-duplication of advertising message or webpage refreshing. What would be the impact if a digital interface user is targeted by the same advertising message several times (notably when the user logs off and logs on or when the user, scrolling the webpage, passes the same ad? At this stage, and concerning these situations, the French tax authorities do not mention if the advertising message is to be counted as one or more for that user into the French digital presence ratio.
  • As regards the notion of “taxable receipts,” the French tax authorities indicate that “amounts returned by the taxpayer to the person who paid them are deducted from the taxable receipts in the tax year in which the return takes place.” This relatively imprecise wording seems to imply the possibility of reducing the amount of taxable revenue in cases of rebates, discounts or refunds granted by the taxpayer. However, these situations are not expressly referred to and clarification on this subject appears to be needed. The draft guidelines do not provide for any tolerance measure in case of double taxation resulting from the co-existence of the French digital services tax and a digital services tax enacted in another country involved in the taxable operations.

The French tax authorities took advantage of this publication to update their previous guidelines relating to the filing and payment formalities.

The draft guidelines now confirm the previous press release (10 February 2020) by which the French government allowed to defer reporting until December 2020 the payment of the French digital services tax instalments due for 2020.

Thus, the French tax authorities have stated that for 2020 only, companies are allowed to defer the payments of digital services tax instalments due in April and October 2020. Companies resorting to this deferral mechanism can remit the instalments through a single payment, performed when filing the form no. 3310-A-SD in December 2020.

KPMG observation

Those affected by the digital services tax need to carefully analyze the draft guidelines and, if necessary, raise their concerns before the end of the comment period on 23 May 2020.

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

Marie-Pierre Hôo | + 33 (0) 1 55 68 49 09 |

Laurence Mazevet | + 33 (0) 1 55 68 49 67 |

Patrick Seroin Joly | + 33 (0) 1 55 68 48 02 |

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