France’s minister of public action and accounts, Gérald Darmanin, wants to reform VAT collection for e-commerce platforms. The French minister also wishes to draw inspiration from the EU’s tax haven blacklist to establish a similar one for fraudulent platforms. EURACTIV’s partner La Tribune reports.
Darmanin will be proposing to reform VAT collection for e-commerce websites. He confirmed this during an interview with the daily French financial newspaper Les Échos on Thursday (22 August).
To this end, the French minister is eager to incorporate new obligations into the Government’s budget bill, which will be presented before the Council of Ministers at the end of September.
The minister wishes to transpose the European directive adopted on 5 December 2017, which aims to modernise and adapt VAT collection to the e-commerce industry.
The new text aims to combat VAT fraud, facilitate cross-border trade and therefore, mechanically increase revenue for the member states. The previous regime was introduced in the early 1990s, at a time when Amazon did not yet exist.
The European directive will have to be transposed by the member states by 1 January at the latest. This means that France would, therefore, be a step ahead of its European neighbours.
According to the latest European Commission report published last September, VAT fraud at the EU level amounted to €147 billion, including about €20.9 billion in lost tax revenue for France.
The European Commission estimates that thanks to the new directive, “member states will gain through an increase in VAT revenues of €7 billion annually.”
In other words, the directive, therefore, makes two significant changes: it creates a so-called ‘one-stop-shop’ and imposes VAT obligations on e-commerce platforms.
Simplifying VAT declaration
For example, more than half of the products sold on Amazon come from third-party sellers, especially SMEs and microenterprises. And this is the case for many so-called marketplaces.
“Currently, if a French individual buys a product from a Spanish company via Amazon, it will have to pay VAT in France. That is if the company reaches the €35,000 sales threshold on the French market,” explained Marie-Odile Duparc, a VAT lawyer at CMS Francis Lefebvre Avocats.
Here, the marketplace is therefore considered as a simple intermediary facilitating sales. At the European level, the small Spanish company will, therefore, have to declare VAT in all EU member states where it reaches the respective thresholds.
This is a real puzzle for these companies as they are currently required to file multiple declarations and follow several procedures.
To facilitate reporting, the EU directive, therefore, introduces the so-called ‘one-stop-shop’ principle. This online portal will allow all European companies to pay VAT in a single member state. The latter will then pay taxes to the country in which the purchase was made.
In the new directive, the threshold has been lowered to €10,000. And a similar mechanism is being set up for companies outside the EU.
“The ‘one-stop-shop’ principle was first tested in 2003 for all providers established outside the EU for electronic services,” explained Marie-Odile Duparc, referring to downloads, application purchases, streaming, etc.
“It was then extended in 2015 to electronic services provided by operators established in the EU,” she added.
The European Commission positively assessed these developments, highlighting that by 2015, EU member states had regained €3 billion in revenue.
Responsibility of e-commerce platforms
“Currently, it is difficult to determine who the seller is from a legal point of view,” and therefore, who must pay VAT, Duparc highlighted.
This is why the directive provides that e-commerce platforms have to collect VAT.
“The idea is to centralise VAT collection because the platforms are best able to know the flow of transactions carried out thanks to their service. They play a crucial role in bringing individuals and third-party vendors closer together,” explained Marie-Odile Duparc.
As a result, platforms will no longer be considered as mere intermediaries but as presumed sellers and resellers.
“On VAT, which is the State’s first revenue, we believe that several hundred million, even several billion can be recovered,” minister Darmanin told Les Échos.
In June, he had already declared that he wanted to recover between €1 and €2 billion by combating VAT fraud by the end of his five-year term.
A ‘blacklist’ for fraudulent platforms
The French minister also announced the creation of a “blacklist of non-collaborative platforms, such as tax havens”, for the first time.
Darmanin even listed four criteria, including the need to “pay the so-called GAFA (Google, Apple, Facebook, Amazon) tax if the company is liable for it, pay VAT, respond to the tax authorities if requested and transmit the income of users.”
“This is good news for French platforms that comply with the rules”, he added, promising “sanctions for those who do not collect VAT.”
[Edited by Zoran Radosavljevic and Samuel Stolton]