Who: French Legislator
The publication of the decree: Decree 2017-1364 dated of 20 September 2017
The European Commission has just approved the enlargement of the scope of a tax previously limited to subscription-based VOD, pay-per-view services and video-sharing services that are fiscally established in France. The tax now also applies to foreign streaming services (such as Netflix) and video-sharing websites (such as YouTube) that distribute content in France but are not established there.
As a consequence, since 22 September 2017, operators, established in France or outside of France, offering access in France to audiovisual content, whether for a consideration or free of charge, are subject to a 2% tax based on the sale price or right of access and on the amounts paid by advertisers and sponsors.
The revenue generated by advertisement and sponsorship is however reduced by a 4% tax allowance, increased to 66% when such revenue is generated by audiovisual content created by private users for the purposes of sharing and exchange within communities of interest.
Companies for which the broadcast of audiovisual contents is only secondary (such as websites of newspapers) as well as operators whose activity consists of the broadcast of trailers or extracts to promote cinematographic and audiovisual works (such as Allociné) are exempted from this tax.
The revenues generated by this new tax will be remitted to the French National Film Fund, known as the CNC, which is expecting to receive approximately 2.5 million euros each year from the two main targets of this new tax: YouTube and Netflix. This will benefit the CNC in helping to finance French original content, from movies to TV series, video games and digital programmes, through subsidies.
The new scope of the tax, although enacted in the Finance Act for 2017 in December 2016 had been postponed until its approval by the European Commission, as France feared that the tax might be seen as an unlawful aid granted to the CNC.
Now that the text has been approved by the European Commission, the extension of the tax has been effective since 22 September 2017.
Why this matters? The extension of this tax, whose return is hard to assess, is a further step for France in its attempt to subject foreign digital business companies to tax. A similar tax has been implemented in Germany which is, with France, a frontrunner in the current discussions on how EU countries should address the taxation of the GAFA .