France introduces increased VAT obligations for online platforms

Out-Law News | 10 Sep 2019 | 11:26 am | 4 min. read

In an attempt to clamp down on VAT fraud, France is increasing the reporting obligations of online platforms. Platforms will be obliged to verify the VAT status of their users from January 2020.

Since 1 July 2016, online platforms and marketplaces operating in France have had to provide information to those who make sales of goods, provide services, or who exchange goods and services on their platform about each transaction. The platform or marketplace must set out the tax payable in respect of each transaction, the tax reporting and payment obligations and link to the websites of the tax and social administrations.

Platforms and marketplaces are also obliged to send users an annual statement of the transactions that were carried out during the year. This must be provided by 31 January of the following year.

Platforms and marketplaces are also obliged to send the tax authorities a document summarising the information sent to users. The first report to the French tax authorities is due by 31 January 2020, in respect of transactions in 2019.

The report to the tax authorities must include information about the user and the marketplace will have to ascertain whether the user is a private individual or a business. Amongst other information, the report will need to provide the tax number of an individual user and the VAT number of a business user.

Reports to the French tax authorities will only need to be made in respect of users who reside in France or who makes sales or services that are subject to French VAT. This means that platforms will need to ascertain the VAT status of their users and whether transactions are within the scope of French VAT. 

From January 2020 platforms and marketplaces will be jointly and severally liable for the payment of VAT in respect of users who have not complied with their VAT obligations, where the French tax authority has issued two formal notices in respect of the user concerned to the platform or marketplace and the platform or marketplace continues to allow the trader to use the platform.

Where the French tax authority believes that a platform user is evading his obligations as regards the declaration or payment of VAT, the tax authority may report this person to the operator of the platform, so that the platform operator can take measures to get the user to comply with their tax obligations. The operator must notify the tax authorities of the measures taken to remedy the breach. After a period of one month from the date of notification or, failing this, of the report, if the situation persists, the tax authority may give notice to the operator of the platform to take additional measures or to exclude the user. Again, the operator must notify the measures taken.

Germany and the UK have already introduced similar measures in relation to joint and several liability. In the UK, HM Revenue & Customs (HMRC) may hold the operator jointly and severally liable for any unpaid VAT due on sales that an overseas seller has made on the marketplace if it knew, or should have known, that the seller is not registered for UK VAT.New EU measures in relation to e-commerce are due to come into force in January 2021. As well as simplifying the VAT rules for sales of goods online, they should also help EU Member States to recover the estimated €5 billion in tax revenues lost in the sector each year - a figure due to rise to €7 billion by 2020.

At the moment, goods can be sold online in the EU by non-EU companies who make use of the storage facilities or 'fulfilment centres' of the online platforms within the EU. Because the goods in the fulfilment houses normally belong to companies from outside the EU, it can be difficult to obtain the VAT due on those goods.

The new measures mean that those who facilitate remote sales of goods whose intrinsic value does not exceed €150, imported from third countries through the use of an electronic marketplace, platform or portal, shall be considered to have received and delivered the goods. This will make the marketplace liable to pay the VAT to the tax authorities.

In an interview for the French economic newspaper Les Echos, Gérard Darmanin, French minister for public accounts, announced that the 2020 Finance Bill should include provisions to transpose the EU directive requiring platforms to collect VAT. However, France wants to go beyond the directive's provisions in requiring the VAT to be collected on all purchases and not only to those whose value is less than €150, he said. A blacklist of non-collaborative platforms will be established as for tax havens, Darmanin said. Non-collaborative platforms would be those which do not comply with four obligations: pay digital services tax, if required, pay VAT, respond to the French tax administration's requests for information and disclose their users' turnover when required.
It is not clear what the sanctions will be for blacklisted platforms.In a separate development France is introducing a 3% tax on revenues deemed to have been generated in France by digital companies, wherever they are established, which make annual supplies of taxable services of more than €25 million in France and €750m worldwide. The digital services tax, which has been nicknamed 'GAFA tax', after US multinationals Google, Apple, Facebook and Amazon, applies from 1 January 2019.

"The enhanced VAT disclosure requirements announced by Mr Darmanin will certainly be a way for the French tax administration to ensure consistency between the declarations the biggest marketplaces or platforms make for the purposes of digital services tax and what they declare for VAT purposes," said Valérie Farez, an expert in French tax at Pinsent Masons, the law firm behind Out-law.

The US has been investigating whether Frances's digital services tax unfairly targets US companies. At the G7 summit in Biarritz in August 2019, French president Macron said that the French digital service tax will be scrapped when measures to reform the international tax system to deal with digitalisation being considered by the Organisation for Economic Co-operation and Development (OECD) are in place. France and the US agreed to do their best to reach an agreement on these reforms by 2020. President Macron said that once the OECD recommendations are implemented, French digital services tax already paid by tech companies could be offset against any international levy introduced