If you are using a service like Netflix, SoundCloud, or cloud-based software and as-a-service products i.e. software-as-a-service, platform-as-a-service, etc. they all come under the term of digital goods even there are many other amenities that are rendered “online” such as websites, site hosting, online ads, and affiliate marketing or other e-services which are consumed on daily basis, all of these refer to the same thing i.e. digital goods.

Digital goods have completely reshaped the old business model from rendering to consuming. This transformation affects the overall tax collection in France in several ways such as digital services rendered by giant digital companies that don’t require factories, offices, and shops, which eventually eroding cities’ land-based revenues from property taxes and development charges.

Tax on Digital Goods in France

There is an enormous reduction in taxes levied on value addition on physical goods along with that digital economy is contributing to unemployment, which results in reduced tax collection by wages and salaries of workers.

To cope with tax reduction, the French parliament adopted the Digital Service Tax (DST) on July 11, 2019. The main objective of this bill is to update the tax rules for the companies operating in the digital sector. 

Scope of the Tax

This tax will apply on two categories according to article 299 of the French Tax Code;

  1. Interfacing Services is the supply of digital interface that allows user-to-user contact i.e. delivery of goods or services among them.
  1. Advertising Services, the digital spaces that will be used by advertisers for the targeted advertising to users in France, based upon data provided by users such as keywords used in search engines.

However certain services are clearly excluding from the scope of this tax;

  1. Content delivery i.e. Streaming videos, music, etc.
  2. Communication services.
  3. Payment services (banking and insurance sectors)
  4. Inter-company services

It is important to know that DST is applied to services “provided in France” only. It means that services that are rendered online and utilized in the territory of France are taxable under DST.

Tax Rate and Base

The DST consist of a 3% rate which is only applied to revenue from French digital services. This mimics the way of tax collection on foreigner’s dividend, interest and royalty income from the local economy, which leads to a complicated system with arguments on DST that must be clarified by French tax authorities.

The amounts to be taken into consideration are those collected as of January 1, 2019.


The company or group of companies falling under the scope of DST are liable to pay two installments in April and October of each year. For the year 2019, a single installment will be paid in November and have been calculated at 50% of the tax that would have been due for the year 2018.

Legal Uncertainty

The compatibility of DST with European legislation and international trade rules need more elaboration.

What’s Next

The progress from physical to digital domain is irretrievable and fast-tracking, businesses are concentrating in the hands of tech giants that can easily shift taxes and income around the globe. The French government needs to be more active and creative while ensuring fair and effective taxation and compliance with bilateral tax treaties.