France: VAT digital economy enforcement included in 2024 Finance Bill
Measures to enhance the fight against tax fraud, focusing on VAT non-compliance in the digital economy
2024 Finance Bill
The 2024 Finance Bill was published on 27 September 2023 and, if approved, would introduce several measures to enhance the fight against tax fraud, focusing particularly on value added tax (VAT) non-compliance in the digital economy.
First, the Finance Bill would boost the resources available to the French tax authorities for detecting fraud by extending for two more years an initial experiment that allows tax and customs administrations to identify fraud through data collection from online platforms and expanding the data collected and offenses targeted. Additionally, authorized public finance agents would be authorized to conduct undercover investigations for serious offenses.
Second, the Finance Bill would update the legal framework for VAT fraud, addressing the challenges of the digital economy. It would introduce a digital injunction to combat fraudulent practices, enabling the removal of websites belonging to non-EU companies that provide services and sell intangible goods online to French consumers without paying VAT.
Finally, the Finance Bill would require domestic purchasers of certificates for hydrogen, renewable gas, and electricity guarantees of origin to self-assess VAT under the VAT self-assessment mechanism and would modify the VAT rules for imports to prevent non-compliance with the VAT rules by dishonest online sellers using drop shipping (i.e., situations where sellers only handle marketing and sales).
Given the increased resources and extended powers of the French tax authorities and the EU-wide cross-border payment data sharing under the Central Electronic System of Payment information (CESOP) starting in 2024, it is crucial for businesses in the digital economy to confirm their VAT compliance. Failure to comply may result in higher penalties (up to 80% in France) as tax authorities may consider such behavior as fraudulent, and, as proposed in France, blocking access to the internet website.
For more information, contact a KPMG tax professional:
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Chinedu Nwachukwu | firstname.lastname@example.org
Laurent Chetcuti I email@example.com
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