France will suspend digital tax payments for 2020 to prevent the imposition of tariffs on certain French imports into the United States.

The French DST is a three percent tax on the revenue of digital companies providing advertising services, selling user data for advertising purposes, or performing intermediation services. Companies with global revenues of EUR750m (USD838m) or more and French sales of at least EUR25m are required to pay the tax.

The US argues that the tax unfairly discriminates against American companies and is currently considering proposals to impose retaliatory tariffs of up to 100 percent on around USD2.4bn worth of French products.

However, according to various media reports, following discussions between French Finance Minister Bruno Le Maire and US Treasury Secretary Steven Mnuchin against the backdrop of the World Economic Forum in Switzerland, France has agreed not to collect digital tax payments this year. In return the US will suspend its threat to impose the additional tariffs, with the two countries now set to hold talks on a more definitive agreement.

French President Emanuel Macron also tweeted that France and the US “will work together on a good agreement to avoid tariff escalation,” following a “great discussion” with President Donald Trump at the World Economic Forum in Davos, Switzerland, on January 20, 2020.

Nevertheless, as talks on the taxation of the digital economy continue at OECD level, it appears that the US remains at odds with other leading economies about the most appropriate solution, and with regard to the situation between France and the United States, Le Maire has stressed that France will not repeal the digital tax, which he reiterated will remain in place until France is able to implement internationally-agreed digital tax measures.

For more information on this, and other topical international tax matters, please visit: https://www.cchgroup.com/roles/corporations/international-solutions/research/global-tax-weekly-a-closer-look

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