|
This chapter is not exhaustive and is limited to broadly outline the tax consequences of the main events occurring when doing business in France. It does not constitute a tax advice or a client - attorney relationship. Materials are not suitable for tax analysis. Visitors are invited to consult a tax lawyer before taking any decision.
 Tax residency
Tax deductibility of creation cost and acquisition cost of a Web site
 Tax residency
A company is taxable in France only on profit derived from commercial and industrial activities carried out in France and on earnings attributable to France by a tax treaty. Same rules apply to losses.
Under French rules, a foreign company is taxable in France on profit derived from a business activity carried out through a permanent establishment or an agent as defined by the applicable tax treaty. In the absence of an applicable tax treaty, a foreign vendor may also be taxable in France when its French operations are carried out through a permanent establishment or an agent as defined by the French tax rules or if it performs a “full commercial cycle” in France e.g. buy and resale goods or services in France.
For e-commerce purposes, a foreign vendor tax resident in a treaty country, cannot be considered as having a permanent establishment in the absence of human presence and intervention. A foreign enterprise carrying out business in France through a web site hosted by a third party’s server located in France will not be considered as having a permanent establishment “PE” in France, i.e. this enterprise will not be taxable in France as a consequence of this activity. Should the foreign vendor employs permanent staff in France for maintenance, management and/or hosting of his web site, it is likely that the French tax authorities would consider that the enterprise has a PE in France.
If the vendor is tax resident in a non treaty country or in a tax haven, the foreign vendor may be taxable in France if it performs a “full commercial cycle”. For e-commerce purposes, a “full commercial cycle” may be sufficient to characterize a PE without any human presence. Such situation must be carefully reviewed.
Tax deductibility of creation cost and acquisition cost of a Web site
- Upon election, acquisition costs are either amortized over 12 months or immediately deductible from the taxable result if less than 500 euros.
- Upon election, creation costs are immediately tax deductible or amortized over 5 years maximum.
- Acquisition costs or creation costs of domain names are neither tax deductible nor amortizable. In our opinion this position may be successfully challenged.
- Access costs to the web and hosting costs of the site are tax deductible.
(Tax guidelines 4-C-03 dated May 9, 2003)
|
Close
