France: Introduction of a new tax mainly targeting US leaders of the digital economy including Youtube?

Written on 17 Oct 2016

The Finance Committee of the French National Assembly just approved an amendment introducing a new tax levied notably on advertising revenue received by video broadcasting platforms, including Youtube. Although the text still needs to be approved by both the French National Assembly and the Senate, this might be a first answer by France to the challenge of the taxation of the Digital Economy.

The Finance Committee of the French National Assembly has adopted, during its first review of the Finance bill for 2017, an amendment introducing a new tax on websites and shops that make available audio¬visual content, either online or via physical copies.

This prospective new tax was quickly nicknamed “Youtube tax” as its aim is mainly to tax advertising revenue of sites making available free and premium video content.

Scope of the proposed Youtube Tax

The tax would be due by operators established in France or outside of France which notably make available:

  •  online audiovisual contents in exchange for a fee; or
  • online audiovisual contents for free (e.g. Youtube, Dailymotion… ).

Companies for which the broadcast of audiovisual contents is only secondary as well as operators whose activity consists of the broadcast of trailers or extracts to promote cinematographic and audiovisual works should remain exempted from this tax. Interactive streaming catch-up service for television programs would also be outside of the scope.

The tax would be due on revenue generated by services rendered in favour of individuals, not subject to VAT, who are established, have their permanent address or usually reside in France.

Basis of assessment of the Youtube Tax

The tax would be levied on total sales and business subscriptions (for paid-for content) or on any advertising revenue and sponsorship (for free content).

The revenue generated by advertisement and sponsorship would however be reduced by a 4% tax allowance, increased to 66% when revenue is generated by audiovisual content created by private users for the purposes of sharing and exchange within communities of interest.

The notion of “private users” is however not defined by the amendment.

Payment of the Youtube Tax

The tax would be levied at a rate of 2%, increased to 10% for websites displaying “pornographic or inciting violence” contents.

The tax applicable on advertising revenue and sponsorship will be levied after a EUR 100,000 tax allowance in order to target operators having a significant activity.

Although we cannot certify that this new tax will be effectively enacted, there is no doubt that the taxation in France of the leading companies of the digital economy will again be a major topic of the parliamentary debates which will occur upon review of the Finance bill for 2017.