Faced with the rapid growth of the sharing economy, French authorities have been examining the equal treatment of players in the traditional economy and those in the sharing economy with regard to tax and social charges. It appears that taxpayers rarely report income from their sharing-economy activities, which are rarely taxed as a result.
Under the French Finance Act for 2016, French lawmakers have therefore sought to harness the potential of sharing-economy platforms by imposing new reporting obligations on users residing in France or selling products or providing services in France.
Under new Article 242 bis of the French General Tax Code (CGI), sharing-economy platforms must report the following for transactions made on or after 1 July 2016:
- upon every transaction, information on their tax and social security obligations (with a link to the websites of the competent administrations), and
- each year in January, a statement of the gross income received during the previous year. The Administration allows the deadline for reporting to be set at 31 March for the year 2017.
A certificate issued by an independent third party stating that these obligations have been met must be sent to the tax authorities before 15 March of each year. Otherwise, the taxpayer may be liable to a €10,000 tax penalty.
Decree no. 2017-126 of 2 February 2017 indicates the information that must appear on the statements sent to users and the type of independent third party authorised to issue the said certificate: an auditor, auditing firm or any other entity, whether a natural person or a legal entity, whose registered office is within the territory of the European Union and which complies with an audit method ensuring an impartial and comprehensive examination.
Through this mechanism, which the Administration recently commented on, the lawmaker made the choice to encourage good citizenship by providing the taxpayer with "fair, clear and transparent" information. This information, however, cannot be cross-checked outside the right of communication applied on a one-off basis. The taxpayer, thus informed, remains solely responsible for reporting its online business and any income generated from it.
At the same time, the French Ministry of Economy and Finance put a press kit online on 2 February 2017 consisting of practical fact sheets organised by business type (ride-sharing companies, property sales or rentals, furnished rentals) that recall applicable rules for reporting income and paying social-security contributions.
The next step for lawmakers is automating the information sent to the Administration. To this end, the amended Finance Act for 2016 added a new obligation upon these platforms, which consists of sending users’ earnings directly to the relevant social security and tax administrations as of 2019.
The new reporting obligation applies to online-platform operators (opérateurs des plateformes en ligne) as defined under Article L 111-7 of the French Consumer Code. This broad definition makes it possible to target all online platforms, whether based in France or abroad and regardless of their business sector.
This tax return form—called "secure automatic reporting of income for online platforms", or DAS in French—must include the following information for each user liable for tax in France:
- identification (for natural persons: surname, first name and date of birth; for legal entities: name, address and Siren no.);
- email address;
- status (private individual or professional);
- total gross income received by the user during the calendar year for its activities on the online platform, or paid through the platform; and
- the category under which the gross income falls.
A copy of this tax return is sent electronically to the user, only for the information that concerns him or her.
Applicable to income earned as of 1 January 2019, this process would generate pre-filled tax returns and calculation of the tax due based on the rules applicable to each income category.
However, this legislation raises issues with regard to:
- the implementation of the procedure, which is complex and costly for the online platforms and the French tax administration;
- legal difficulties related to transferring personal data;
- the legal capacity of the tax authorities to force platforms to comply with their new obligations, in particular when these platforms are not based in France. Nevertheless, this new legislation does not currently provide for any penalties in cases of failure to report.