France: Joint liability for VAT of online platforms

France: Joint liability for VAT of online platforms

The French tax authorities have initiated a public consultation concerning joint liability of online platform operators for the payment of value added tax (VAT) owed by certain defaulting users of the platform in France. The consultation is open until 31 May 2020.

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The consultation document (BOI-TVA-DECLA-10-10-30-20-20200323), still at the draft stage, provides certain clarifications regarding the position of the tax authorities on application of this joint liability mechanism. 

Overview of joint liability mechanism

Law No. 2918-898 (23 October 2018) included measures to address tax fraud, and in particular joint liability for online platform operators for the payment of VAT owed by certain defaulting users (Article 283, bis and 293 A ter of the French tax code).

In brief, the scope of the joint liability rules is as follows:

  • Companies subject to the VAT joint liability procedures are online platform operators, operating in France, and subject to the reporting obligations of Article 242 bis of the French tax code. For information about the reporting obligations of online platforms, read TaxNewsFlash.
  • Taxable persons that may be subject to notification from the French tax authorities are those, regardless of their place of establishment, for whom there are presumptions that they have failed their VAT reporting and payment obligations in France and that conduct the following operations by means of an online platform:
    • Supplies, to non-taxable persons, of goods or services that are taxable in France (Article 283 bis)
    • Imports of goods taxable in France (Article 293 A ter)

The joint liability generally is effective as of 1 January 2020, and also applies regarding VAT reporting and payment obligations relating to periods prior to 2020 when there were presumptions that the taxable person failed in the VAT reporting and payment obligations, subject to applicable statute of limitation rules. 

Joint liability process

Joint liability for VAT can only be applied after a procedure initiated by the French tax authorities, in general as follows:

  • First, the French tax authorities notify (and provide a report to) the platform operator that there are presumptions of the platform user’s non-compliance with the user’s VAT obligations. This reporting will be expected to be simplified, given the information provided in the reports submitted to the French tax authorities at the beginning of the year about activity of the platform users.
  • Second, following this notification and report, the online platform operator must undertake all necessary measures to enable the taxable person (user) to regularize the situation and then the platform operator must notify the French tax authorities of the measures taken. In practice, the platform operator would need to remind the defaulting user of the tax obligations. The platform operator would ask the user to contact the French tax authorities to regularize the VAT situation and, to this end, would provide the user with the contact details of the tax office.
  • Next, if after a one-month period, the French tax authorities consider that the VAT situation of the defaulting user has not been regularized, the tax authorities are to give formal notice to the platform operator to take additional steps or to exclude the taxable person from its platform. A platform operator that receives two such formal notices in less than a 12-month period could be placed on the list of non-cooperative platform operators (Article 1740 D of the French tax code).  Read TaxNewsFlash
  • In response to a formal notice from the French tax authorities, the platform operator must either take other additional measures or exclude the user from the platform and also must notify the tax authorities of the measures taken or of the exclusion action.
  • A failure to implement the additional measures or exclusion of the user at the end of a one-month period renders the platform operator as jointly liable for payment of the VAT due by the defaulting user. Thus, the platform operative will be required to pay the VAT (instead of payment by the user). 

KPMG observation

In practice, it appears that the chances of an online platform for recovering VAT from the defaulting user would be relatively low.  Accordingly, platform operators would want to consider what are the existing means allowing for the effective identification of defaulting users before any action by the French tax authorities and in the absence of such, reconsider their internal control processes. Online platforms will need to have an integrated system that allows for effective selection of their trading partners and to this end would want to determine that there are continuous controls in place to allow for compliance with the tax obligations. There is no doubt that the relationship between online platforms and their users is evolving (refer to the March 2020 decision of the Cour de Cassation in Uber n°19-13.316, 4 March 2020) and may require online platforms to revisit the establishment of their supply chains.

KPMG observation

The joint liability mechanism for VAT payment in France was directly inspired by the regime adopted by the United Kingdom in 2016, and reflects a new environment for online platforms. In France, platform operators are now required to inform their users about their social and tax obligations and to provide information to the French tax authorities about the transactions and operations conducted by the users of their platforms in France (Article 242 bis of the French tax code).

The joint liability imposed for non-payment of VAT due by defaulting users effectively involves platform operators in the process of determining that the users of their platforms comply with their VAT reporting and payment obligations—meaning that platform operators will need to take an active approach in making sure defaulting users regularize their tax situations. Platform operators that do not act effectively can suffer a significant reputational risk (and potentially a criminal risk).

The joint liability measures are linked to the distance-selling reform that has an effective date of 1 January 2021 (when platforms will be liable, under certain conditions, for VAT on distance sales of goods when they facilitate certain transactions). This new regime will be accompanied by new reporting obligations, such as keeping a register of transactions.

The consultation relating to the joint liability mechanism provides many details on the practicalities of these rules. While the consultation is still at the draft stage, platform operators may want to consider submitting comments to the French tax authorities.


For more information, contact a tax professional with the KPMG member firm in France:

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

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