Announced, proposed and implemented: Key features of France's DST

Global Tax Alert


The French Digital Services Tax (DST), applicable since January 1, 2019, has been commented on by the French tax authorities in their administrative guidelines published in the course of 2020. In this alert, we highlight the clarifications made by the French tax authorities in their official administrative guidelines.


As a reminder, the French DST applies at the rate of 3 percent to the revenues generated from online intermediation services and targeted online advertising in France. In principle, companies with (i) digital global turnover of more than €750 million and (ii) digital turnover of more than €25 million in France are targeted by this tax, but many more of their clients are likely to bear the economic burden of this tax.


As no mutual agreement has been reached at an international level between the EU countries or the OECD countries regarding digital taxation, the French DST is still applicable for the moment.


Clarification of certain French DST principles: scope, basis, territoriality, year of application


First of all, the French tax authorities define the term “taxable service” as “a set of material resources that are functionally united in order to perform specific functions.”  This is different from the definition of “taxable services” as used for VAT purposes; “taxable services for purposes of DST may not be viewed as particular economic transactions. The DST is subject to an overall computation including each type of taxable services.


Digital intermediation services and targeted advertising services are the two categories of taxable services under the DST, which are themselves divided in two classes of services:

  • Digital intermediation services: a digital intermediation service exists where a digital interface is available, by means of electronic communications, and enables users to enter into contact and interact with each other. This category includes marketplaces and matchmaking services.

  • Targeted advertising services: these services allow advertisers to display on a digital interface advertising messages based on the data collected from users. This category catches placement services and services limited to the transmission of users’ data.

In view of the above, to fall within the definition of “digital services” requires the use of a digital interface that allows in particular users to interact with each other. The French administrative guidelines define a “digital interface” as any software allowing one or several users to send and receive information. Interaction between the users is necessary for the intermediation services that are based on the notion of providing and receiving. The French administrative guidelines provide further details of the digital services that fall within the scope of the DST.


In addition, taxable services rendered between affiliated companies are not taken into account for the determination of the DST, unless the same services are rendered both to affiliated companies and to third parties. If the clients are both affiliates and third parties, the French tax authorities consider that it would be artificial to split the services, and therefore all corresponding turnover is taxable, which reduces the scope of the exemption of DST. For DST purposes, related companies are those that are linked to each other by virtue of a control relationship and are therefore members of the same DST group.


Only taxable services rendered in France during a taxable year are subject to the DST. A taxable service is considered to be supplied in France if, during the year, at least one user of the digital interface is located in France. Thus, the French administrative guidelines specify how to determine whether digital services are rendered for the benefit of a person located in France, bearing in mind that the criteria depend on the services that are supplied.


Also, the DST applies for a given year to an identified taxable taxpayer only if the fees paid for these services are actually received by the service provider. In this respect, the French administrative guidelines indicate that the fact that the fees were only received during a certain period of the year or were only paid by beneficiaries located outside France should have no impact.


Moreover, the determination of the exceeding thresholds is made on the basis of the total taxable fees collected at the level of the DST group (within the meaning of Article L. 233-16 of the French commercial code). These thresholds are assessed as a whole for all taxable services and not on a category by category basis. It should be noted that the characterization of a DST group is distinct from VAT group rules and tax consolidation rules.


The amount of the DST due is equal, for each taxpayer and for each taxable service to the total of the three following terms:

  • the total amount of fees collected, on a worldwide basis, in consideration for the supply of taxable services (“taxable services”)

  • a representative percentage of the part attached to France for this service (“French presence proportion”) and

  • the 3 percent rate.

The French presence proportion is determined by the location in France of the users of digital interface. This determination is different for each type of taxable services. 


Finally, the French administrative guidelines indicate such factors as the reporting obligations of the taxpayer, the payment process, and the tax audit process.


For taxpayers subject to the ordinary regime, the DST is generally declared and paid in March. Instalments are applicable in April and October. Unlike last year (2020), no deferral of DST instalments is contemplated.


Practical impacts of France’s DST


During 2020, the DST continued to generate numerous reactions in the French and international market:


  • Certain operators have informed their clients or business partners that they will modify their fees to take into account the economic impact of the French digital services tax. It is therefore critical for all groups to review the tax provisions of their existing agreements to determine whether the economic burden of the tax can effectively be shifted to them.

  • The former US President expressed the view that in response to this tax, additional US customs duties might be imposed on certain French products (eg, wine) from January 6, 2021. However, a recent press release from the US Trade Representative indicates that it has been decided to suspend such customs duties fines.

  • The new tax remains questionable in various respects, as it might be viewed as not fully consistent with EU or international tax treaties (eg, by replacing corporate taxation prohibited by existing treaties).

Find out more about this evolving concern by contacting the author or your usual DLA Piper advisor.

To review the key features and country-specific developments of the DST in Italy, Spain and the United Kingdom, please click on the following links:

Key features of Italy’s DST

Key features of Spain’s DST

Key features of the United Kingdom’s DST