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The Davos deal on the French DST

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The French digital services tax, which was enacted in mid-2019 with effect from 1 January 2019, has been expected to generate c. €400m of tax revenues for fiscal year 2019. A first instalment was due in November 2019, with the balance being due in April 2020.

It was expected that, for fiscal year 2020, the French DST would generate a similar amount of tax revenues (c. €450m). But, following the discussions between France and the US on the sidelines of the World Economic Forum in Davos, this is subject to changes that may result from the negotiations at the OECD level.

According to publicly available information, an agreement has been reached between France and the US whereby France would, in return for the suspension of US plans to introduce additional tariffs on certain French goods, postpone collection of certain French DST instalments due in April and October 2020 until December 2020, so as to allow time for the negotiation of a global agreement at the OECD level.

This postponement would not impact the French DST due for 2019, in respect of which the balance remains due in April 2020. This appears consistent with the position of the French government, as reported in press releases, according to which the agreement must not be seen as a sign of the French government abandoning the French DST, but merely as a postponement of its collection for fiscal year 2020 until the outcome of the negotiations at the OECD level.

If a consensus is reached in the OECD negotiations before the end of 2020, notably in respect of the scope and the rate of the tax, the French DST is likely to be amended, probably with effect from 1 January 2020, i.e. in respect of the French DST due for fiscal year 2020. If not, the French DST would be due under the existing rules. In each case, we would expect the payment deadline for the 2020 instalments to be the same, i.e. December 2020, with a final assessment and balancing payment in April 2021. 

Victor Camatta & Franck Morhain, Bredin Prat