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France unveils landmark tax on internet giants

France is set to unveil legislation Wednesday to increase taxes on global internet giants such as Google and Facebook, putting it among a vanguard of countries seeking to force the companies to pay more in the markets where they operate.

France unveils landmark tax on internet giants
Photo: AFP
President Emmanuel Macron came to power in 2017 promising to increase levies on global tech and internet groups, seeing their often minimal tax rates as part of a backlash in France and Europe against globalisation.
   
Having failed to persuade his European partners to introduce an EU-wide tax — because of objections from low-tax jurisdictions such as Ireland and fears of provoking US President Donald Trump — France is to go it alone with its own new mechanism.
 
Under a proposal set to be discussed by cabinet ministers and submitted to parliament, large companies operating in France would face a tax of three percent on their digital sales in the country.
   
“The amount obtained from this three percent tax on digital gross sales in France from January 1, 2019 should soon reach 500 million euros ($566 million),” Economy Minister Bruno Le Maire told the French daily Le Parisien at the weekend.
 
   
The new levy is known as the “GAFA tax” in France — an acronym for US giants Google, Apple, Facebook and Amazon — who have until now routed their 
sales in France through subsidiaries in low-tax EU members.
   
In one of the most best known cases, the European Commission concluded that Apple had paid an effective corporate tax rate of just 0.005 percent on its 
European profits in 2014 — equivalent to just 50 euros for every million.
   
In 2016, it was ordered by the European Commission to pay 13 billion euros in back taxes to Ireland which were judged to amount to illegal state aid.
   
Under EU law, internet giants can choose to report their income in any member state, prompting them to choose low-tax nations such as Ireland, the Netherlands or Luxembourg.
 
Fiscal justice
 
Under the draft legislation set to be presented by Le Maire on Wednesday, only digital companies with global annual sales of more than 750 million euros and sales in France of at least 25 million euros would be taxed.
   
“If these two criteria are not met, the taxes will not be imposed,” Le Maire said.
 
About 30 companies from the US, China, Germany, Spain and Britain as well as France would be affected, he said.
 
For Le Maire, taxing the companies “is a question of fiscal justice” as “digital giants pay 14 percent less tax than small- and medium-sized European 
companies”.
 
France demands Amazon delivers €10 million in fines for 'abusive practices'   
Photo: AFP
 
Ireland, Denmark and Sweden have blocked EU efforts to devise a new tax for fear of detering investment, and Germany has proved lukewarm on the issue, 
fearing US retaliation against its car industry.
   
Despite the failure to reach consensus at the European level, France is still hoping an agreement can be reached globally by 2020. 
   
Paris says it is seeking “common ground” on the issue with fellow members of the Organisation for Economic Cooperation and Development (OECD), a group of the world's advanced economies.
 
Low-tax nations
 
Britain, Spain and Italy are also working on national versions of a new digital tax, while Japan, Singapore and India are planning schemes of their own.
   
France's move to legislate comes after aggressive action from tax authorities to pursue the companies in the courts, with mixed results.
   
Apple said last month it had reached an agreement to settle 10 years of back taxes, reportedly for nearly 500 million euros.
   
In 2017, however, France's tax collection drive suffered a setback with a local court ruling that Google was not liable to pay 1.1 billion euros in taxes claimed on revenues transferred from France to Ireland.
   
Raphael Pradeau from the anti-globalisation Attac lobby group said the proposed French tax is “symbolic and does not solve the problem of massive fiscal evasion”.
   
“It's as if we accept that such firms can practice tax evasion in return for a few crumbs,” he said.

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TAX

The vocab you need to understand French taxes

Declaring and paying taxes in France can be a complicated affair, especially for first-timers, and the intricate French vocabulary does not exactly simplify the process. This language guide might help.

The vocab you need to understand French taxes
Illustration photo: Miguel MEDINA / AFP

If you are encountering the French tax system for the first time, just looking at the various forms can make you dizzy, as the vocab isn’t exactly everyday-French.

Even French natives sometimes struggle to understand what they are being asked about, which is why the government has created a tax lexicon (available HERE).

It is 23 pages long, but we have picked out the key terms and added a few that might be unfamiliar to foreigners.

If, however, you are looking for a specific term that doesn’t appear in the list below, we recommend you check the official guide. 

We have also explained in detail how to fill out the annual tax declaration HERE.

Nom – as with all French forms, nom refers specifically to your surname or family name. Your prénom (first name) comes later. Tax forms generally ask for your nom de naissance which is the family name you were born with (even if you have changed your name through marriage) and will then ask for nom auquel vos courriers seront adressés or name for correspondence to be addressed to.

EXPLAINED: What’s in a name? Understanding how to fill out forms in France

Avis d’imposition – tax notice. This is for your annual tax return. If your main residence is in France you must fill in a tax return – even if all your income comes from another country. France has double taxation agreements with most countries, so if you have already paid tax on, say, income from a rental property in the UK you will not be liable for more tax in France on the same income. But you must still tell the French tax man about it.

EXPLAINED: Who has to make a tax declaration in France in 2021?

Déclarant – refers to the person declaring the taxes. The verb is déclarer and un déclarant is la personne qui déclare – the person who declares. The form has spaces for two déclarants because married couples and those in a civil partnership file a joint return. If you are declaring as a single person just ignore the column for déclarant 2.

Foyer fiscal – tax household. France bases taxes on the household and you will be asked about it in detail when filling out your declaration. Couples who are married or in a civil union (Pacs) should make one joint declaration rather than two. If you got married halfway through the year you can now declare one common declaration for the whole year.

Etat civil – civil status. Choose between célibataire (single), marié (married) or Pacsé (in a civil partnership). 

Parent isolé – single parent. This only goes for those who were not living with a partner on December 31st the year before declaring the taxes. If you got divorced, separated or lost your partner after that date, you have to wait until next year to declare it. In addition to parents, this category also includes singles who are taking care of a disabled person.

Enfant mineur – child under 18 years old.

Enfant majeur – a child over 18 years old. Parents in France may attach their adult child to their tax declaration until the age of 25, under certain conditions.

READ ALSO: What the French government doesn’t tell you about filing taxes

Personne à charge – means ‘person to take care of’, and means that you have a person in your household that you are financially responsible for, usually referred to in English as a dependant. 

Concubinage – a couple who live together but aren’t married or in a civil partnership. If that’s you, you’re not allowed to tick the box of parent isolé if you have children.

Numéro de sécurité sociale – social security number. If you’re registered with French social security this number (15 figures) appears on your Carte Vitale health card and if you’re an employee it should appear on your payslips. If you don’t have a social security number in France, tick the box “pas de numéro de sécurité sociale“.

Prélèvement à la source – This sounds confusing, because it’s sometimes translated as “withholding tax”. However it just means the tax that is automatically deducted from your salary each month if you are an employee. Usually referred to in English as ‘taxation at source’ or PAYE (pay as you earn), it’s a relatively recent innovation in France.

READ ALSO: The French tax calendar for 2021 – which taxes are due when?

Revenus des indépendants – income for the self-employed. Whereas employees get their taxes deducted automatically from their payslip, self-employed people, contractors or freelancers have to declare all their income and social benefits, if any, on their tax declarations. 

Micro-entrepreneur – this is a specific professional status that self-employed people may opt for if their income is below a certain threshold. It used to be known an auto-entrepreneur.

Comptes à l’étranger – foreign bank accounts. If you have a bank account in a country other than France, you have to declare that to the tax man, or risk a €1,500 fine (€10,000 for those with an account in a country that doesn’t have a tax evasion deal with France) per account. New international banking rules aimed at money-launderers mean it is increasingly easy for countries to find out this information.

Contribution à l’audiovisuel public – this means ‘contribution to the public audiovisual’. It is the French equivalent of a TV licence and is paid by almost everyone. You pay it if you have a TV in your property, even if you don’t watch French TV.

Abattement – rebates. France has a long list of specific tax rebates, some of which are directed professional groups while others go to parents for costs like childcare and domestic help. Find out more about the deductions available here.

Paiement en ligne – online payment.

Coordonnées bancaires – bank information (such as the account holder’s name, account number, BIC and IBAN) you are given the option to add this to your tax declaration so that payments can be taken – or refunds credited – directly.

Taxe d’habitation – the housing tax paid by those living in a property, not the owner, is in the process of being phased out and most people won’t have to pay it this year. However second home owners are excluded from the phasing out and still have to pay it, bar a few exceptions. This is separate to the annual tax declaration and bills are sent out in the autumn.

Taxe foncière – this is the tax for property owners, second home owners pay both this and the taxe d’habitation. The tax on property owners has risen in many areas over the past couple of years.

READ ALSO What is taxe foncière and do I have to pay it?

Revenus fonciers – this means ‘property income’, but it only refers to income coming from properties that are rented out unfurnished. If you rent out a furnished property that also has to be declared, but under the box called bénéfices industriels et commerciaux (BIC).

READ ALSO: Five things to know about renting out your holiday home in France

Micro foncier – the box to tick if the revenus fonciers are up to €15,000 annually, which allows for a 30 percent tax rebate on the gross income.

Régime réel – the box to tick if the revenus fonciers exceed €15,000 annually, in which case there won’t be any tax rebate available.

Pensions – pensions. You have to declare any pensions you receive, whichever type it may be, even if they are paid by another country. There are several other similar terms that belong to the same category as pensions.

Allocations – economic help schemes.

Indemnités – allowances.

Retraites – pensions.

Rentes – annuities. 

Prime – bonus.

Revenu brut – gross revenue.

Revenut net – net revenue.

Demande gracieuse – means ‘gracious request’ and is what you may do if, upon receiving your tax notice, you realise you could have paid less tax if you had ticked a different box somewhere or given additional information. The term ‘gracious’ is there to signify that the tax man can choose to accommodate your request if he so pleases, but there’s no rule saying he has to. As a general policy we would recommend always being very polite to tax authorities.

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