Introduced in 2019, the French digital services tax (DST), often called the “GAFA tax”, targets large digital groups whose business relies on monetising user data and attention. It is separate from VAT: it is an additional tax levied on the revenue generated in France by certain digital services.
For a foreign company the question is twofold: does the group cross the thresholds, and how are the return and payment organised in France? This article covers scope, calculation and filing obligations, without replacing an analysis of your own situation.
The DST in a nutshell
The DST taxes part of the revenue that large digital players derive from users located in France. It does not replace VAT: the same group can owe VAT on its sales and DST on some digital revenue.
Thresholds to monitor
The tax applies to companies whose worldwide revenue from taxable digital services exceeds a first threshold of several hundred million euros, and whose French share exceeds a second threshold in the tens of millions. At the time of writing, the thresholds are EUR 750 million worldwide and EUR 25 million in France, and the rate is 3%; these parameters may change and should be checked.
Both conditions are cumulative: an international group can pass the first threshold without owing DST in France if it does not pass the second. The test is applied at group level, not entity by entity.
Taxed services: intermediation and targeted advertising
Two broad categories of services fall within scope:
- making a digital interface available that lets users get in touch and interact with other users (marketplaces, matching platforms);
- targeted advertising services based on data collected about users.
Direct sales of goods or services and regulated financial services are in principle excluded. Hybrid business models need to be assessed case by case.
| Type of activity | Within DST scope? |
|---|---|
| Marketplace connecting users | Yes, in principle |
| Targeted advertising based on user data | Yes, in principle |
| Direct sales of goods or services by the company | No, in principle |
| Regulated financial services | No, in principle |
Calculating the tax: the taxable base
The base is the taxable revenue attributable to users located in France. Determining that share, that is, splitting revenue between users in France and abroad, is often the most technical part of compliance.
The location criteria used (IP address, connection location, etc.) should be documented, supporting evidence kept, and a consistent method applied from one year to the next, as it may be reviewed during a tax audit.
Filing and payment
The DST is reported on an annual return, together with instalments paid during the year and calculated on the previous year’s taxable revenue. The exact dates and procedures should be checked each year with the tax authorities.
A foreign company must also consider its other French obligations: VAT registration France, VAT returns and, where relevant, appointing a French VAT agent.
How Hanoutax can help
As an indirect tax agent (mandataire), Hanoutax assists affected groups under a mandate: scope analysis, estimating the tax base, and preparing and filing returns and instalments. The firm also covers VAT for foreign companies: acting as French VAT agent, commonly known as a fiscal representative France, and VAT registration France.
This information is general; each situation must be reviewed individually. To learn more, see our digital services tax page.
FAQ
Who owes the digital services tax?
Companies, French or foreign, whose worldwide revenue and French revenue from taxable digital services each exceed a threshold. The two thresholds are cumulative.
Does the DST replace VAT?
No. The DST is a separate tax in addition to VAT. A company can owe both.
Does a foreign company need a French VAT agent?
It depends on where the company is established and what it does. VAT rules differ from DST rules, so a prior analysis is advisable.
How often is the tax reported?
An annual return is filed, together with instalments during the year. Exact deadlines should be checked with the tax authorities.
Are direct sales of goods taxed?
In principle no: the DST targets intermediation between users and targeted advertising, not direct sales of goods or services.
A question about the DST or VAT in France?
Related reading
Informational content, not legal advice. The rules that apply depend on your situation.
