France Proposes 5% Digital Services Tax Increase for 2025 Budget

After Italy announced its plans to change its Digital Services Tax (DST), French lawmakers also proposed changes to the DST rules in the 2025 Budget. However, while Italys' solution is to remove the global and national DST threshold, France has a different approach to generating more state revenue from digital services.

While many countries are still waiting for the final decision to implement the OECD Two Pillar Plan, scared of potential US trade sanctions retaliation, France is considering changing the DST rules to reduce its budget deficit.

Proposed Changes and Its Impact 

France introduced the DST, also known as GAFAM, in 2019, setting it at a 3% rate. Under the DST rule implemented, the taxable persons subject to the DST are French and foreign companies whose annual turnover from taxable supplies is EUR 750 million globally. In contrast, at least EUR 25 million is generated from French consumers.

Five years later, France is considering a different approach than Italy as it debates whether to increase the DST rate. The first suggestion was to increase it to 6%, but it was rejected. However, a new proposal was made to increase it to 5%, which would generate more than EUR 500 million in additional revenue for the national budget.

This all comes as part of drafting the Finance Bill 2025 and debate on all taxes and other budgetary measures for the following year. The 5% DST proposal is still being evaluated and discussed, so it remains to be seen what the French lawmakers will decide.

Conclusion

As the implementation of the OECD Two Pillar Plan is still uncertain, more and more countries are taking steps towards implementing or updating their DST rules and regulations. The Pillar One is essential for digital services and companies engaged in its supply. 

Therefore, while waiting for a consensus to be reached for a unified rule on a global level, it should not come as a surprise if other countries start to follow Italy or France and take matters into their own hands. This will add additional financial and operational challenges for global companies.

Source: National Assembly - Amendment No. I-735, National Assembly - Amendment No. I-CF1747, Finance Bill for 2025,  VATabout - Italy Proposes Removal of Digital Service Tax Thresholds in 2025 Finance Bill