Google is not liable for €1.12 billion in back taxes in France because it does not have a permanent establishment in the country, a French administrative court ruled on July 12.
The court held that Google Ireland Ltd. (GIL) does not have a PE in France as a result of activities performed by Google Inc.’s French subsidiary, Google France (GF), and therefore is not liable for various taxes levied for the period from 2005 to 2010, according to a court release. The court issued five separate opinions dealing with the various taxes at issue, but the central issue in each case was whether GF constituted a PE of GIL.
French authorities levied tax assessments on GIL based on their belief that GF was acting as GIL’s agent in France, but the court found that GF did not have the legal authority to bind GIL contractually. In its decision regarding corporation and withholding tax, the court evaluated the tax authority’s claim that GIL had a PE in France under article 2(9) of the France- Ireland tax treaty and found that GF does not have the legal authority to conclude contracts in France on behalf of GIL. GF only has the authority to find customers for GIL.
The court also ruled that GIL is not liable for VAT for the period in question because GF’s staff and systems did not independently have the capability to place advertisements ordered by French customers online. The court noted that GF did not have the means to perform all the relevant services in question, particularly because it did not have the necessary servers in France. Similarly, GIL was found not liable for minimum professional tax because GF lacked the physical assets to perform all of the relevant advertising services.
Aisling Donohue, a partner at MG Partners, told Tax Analysts it is unclear what impact this case will have on similar cases throughout the European Union, such as those against Apple and Amazon. Donohue said the French court’s decision raises interesting questions regarding previous claims by European Commissioner for Competition Margrethe Vestager that if other EU countries revised their tax assessments of Apple’s arrangements, Apple’s state aid bill to Ireland may be reduced, Donohue said. She noted that it was interesting that the French court appears to have reverted to a fairly traditional approach to treaty interpretation.
Donohue said the French decision may not be as persuasive in a case dealing with a company like Apple because Apple sells physical products, whereas the majority of Google’s revenue comes from advertising.
By Alexander LEWIS
Cette information est extraite de notre service d'actualité taxnotes
