C. THE OBLIGATION OF USER INFORMATION: A FIRST STEP TOWARDS TAX COMPLIANCE
1. Article 242 bis of the General Tax Code
Article 87 of Finance Act No. 2015-1758 of 29 December 2015, for 2016 established an obligation for platforms which facilitate contacts by electronic means to inform their users about taxation and social contributions , codified in Article 242 bis of the General Tax Code.
It should first be emphasised that this article, in its initial version, had been introduced by the Senate, at the initiative of Albéric de Montgolfier , general rapporteur of the Finance Committee, in the form of a secured automatic reporting system, implemented by the platforms, of the income of their users (see below), as proposed by the Working Group in its report of September 15 th , 2015. Adopted by a very large majority in the Senate, this article was then amended by the National Assembly, at the initiative of the Government, becoming a simpleobligation of information.
Although the system adopted is less ambitious than was initially intended, Article 242 bis of the General Tax Code is nevertheless an important first step towards tax compliance, and is behind the public authoritiesawareness of the need to act, and awareness by the platforms of their responsibility in this area.
This article contains two obligations that are imposed on the operators of online platforms:
- firstly, in I, an obligation to provide, each time a transaction is concluded, fair, clear and transparent information about the tax and social contribution obligations of their users;
- secondly, in II, an obligation to communicate to their users an annual summary of the gross amount of the transactions they have received through their site, which is more or less a summary of their gross revenue.
These provisions are applicable to transactions carried out on or after 1 July 2016.
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Article 242 bis of the General Tax Code I. Entities, regardless of their place of establishment, which put into contact remotely, by electronic means, persons for the purpose of the sale of property, the provision of a service or the exchange or sharing of property or a service are required to provide, each time a transaction is concluded, fair, clear and transparent information about the tax and social contribution obligations of the persons who carry out commercial transactions through them . They may use, for this purpose, the elements of information made available to them by the competent authorities of the State. They are also required to make available an electronic link to the websites of the administrative authorities allowing them to comply, where necessary, with these obligations. II. In addition; the entities referred to in I communicate to their users, in January of each year, a document summarising the gross amount of all known transactions received through them in the previous year . III. - The obligations laid down in I and II apply to users residing in France or who make sales or provide services in France. IV. - The entities referred to in I are certified, every year, before 15 March, by an independent third party , compliance, with regard to the previous year, with the obligations laid down in I and II. V. A decree of the Council of State lays down the conditions for the application of this article. |
The implementing conditions of this Article were specified by Decree No. 2017-126 of 2 February 2017 , which details, in particular, the list of tax and social contribution obligations about which the user must be informed, i.e. the information relating to the tax systems and the social regulations applicable to these amounts, the reporting and payment obligations which result from them to the tax authorities and the organisations which collect social security contributions as well as the penalties incurred in the event of a breach of these obligations . The platform must provide the user with links to access this information. In practice, these lead to the five explanatory sheetspublished on the same day (see above).
The annual summary sent to the user must state the number of transactions and the total amount of the amounts received on the occasion of the transactions carried out on a platform, about which the entities putting the parties into contact are aware, excluding the commissions received by the entities . The elements of identification are relatively detailed : the decree thus mentions the user's full name and email address and, if applicable, the postal address, as well as, if the user is a company, its VAT number or, if it does not have one, its registration number in the Commercial Register (RCS) or, for non-resident businesses, their tax number issued in their country of origin. The platforms themselves must provide the same information.
Implementation of the provisions of Article 242 bis of the General Tax Code is currently in progress this should be welcomed, because it was not a foregone conclusion a few months ago.
Several platforms already complied with all or part of these provisions, even before being legally obliged to, since they provide their users with a periodic summary of their gross proceeds, and inform them, if relevant, of their tax obligations. A platform like Airbnb is a good example in this respect : the platform sends its hosts a summary of their gross income at the start of each year and this information can be viewed at any time on their user account. Occasionally, the platform also sends e-mails to its users to inform them of recent legislative and regulatory changes 47 ( * ) , which are also available in the sites help sections. The help sections of Amazon also have a lot of information about taxation but more about VAT than income tax or corporation tax. This is the interest of the platforms themselves , since sending a periodic summary of the amounts received is simply a service that is expected by the users.
Many other platforms are in the process of complying with the legislation , the slight delay observed in several cases being tolerated by the administrative authorities 48 ( * ) , due to the late publication of the implementing decree. The hearings conducted by the Working Group, however, have revealed a number of questions and concerns , about which it would be good if the tax authorities, or the legislature, were able to provide some answers. Among these, for example are:
- with regard to the obligation to provide information, the question of how to respond to the criterion each time a transaction is concluded : although it appears suitable for most economic models, it is however difficult or even impossible to apply for models based on pay per clickor pay per view , for example in the case of online advertising or online videos for example, a Youtuber receives about EUR 1 for every 1,000 views 49 ( * ) ;
- with regard to the annual summary, the question of its application to platforms which offer only activities that are exempted due to their nature , i.e. mainly second-hand sales and car sharing (and other activities involving cost-sharing). On the one hand, sending a summary, apart from the fact that it requires specific developments, could create a certain amount of confusion among users . On the other hand, allowing these platforms not to fulfil such an obligation on the basis of their own assessment of the nature of their activity would create an encouragement to make assumptions about the non-taxable nature of the activities, opening the door to many deadweight effects . In any event, the current wording of the law indicates the gross amount of the transactions, which does not allow cost-sharing or second-hand sales platforms to be exempted from the obligation.
The Working Group proposes these provisions should be adjusted to take account of the diversity of models of online platforms (see below).
2. The challenge of platform certification
Given these uncertainties and the novelty of this obligation, the main considerations have focused on the conditions of platform certification .
Indeed, Article 242 bis of the General Tax Code provides that the online platforms are certified, every year, before 15 March, by an independent third party , of compliance, for the previous year, with the obligations laid down in I and II , i.e. the information obligation each time a transaction is concluded and communication of the annual summary. This certificate must be sent by the platform to the tax authorities. Its non-presentation is penalised by a fixed penalty of EUR 10,000 , laid down in Article 1731 of the General Tax Code.
Decree No. 2017-126 of 2 February 2017 specifies that this certificate is issued by a certified auditor, an audit firm or any other entity , natural or legal person, having its registered office within the territory of the European Union and complying with an auditing method providing an impartial and comprehensive review . The entity issuing the certificate must present guarantees of independence, integrity and of good repute and complete its mission, avoiding any conflict of interest. It must not be subject to the undertaking to which it delivers the certificate .
The hearings conducted by the Working Group have shown that a certification offering was being formed , since Article 242 bis created a new market for certifying third parties.
This certificate is, in fact, of great importance, most probably much greater than what was anticipated when the law was passed. Given the physical impossibility of the General Directorate of Public Finances (DGFiP), due to the lack of technical and human resources, to directly check compliance, the quality of the certification is critical to ensure the tax compliance of the users of the platforms, and consequently the platformsreputation . Should the certificate play a role in the automatic reporting, as the Working Group proposes (see below), its importance would be increased even more.
However, currently, in the absence of clarification by the administrative authorities and a truly structured market, the exact scope of certificationremains extremely vague, voicing the concern of many actors heard by the Working Group . Three main questions arise:
- firstly, the content and the conditions of the certification . The audit should, in principle, cover not only the existence of the information provided to the user (general conditions of use, help sections, content of the annual summary, etc.), but also the concrete procedures implemented to ensure effective application of the rules, which could involve a thorough review of the internal algorithms and mechanisms (thresholds and criteria for detecting professional sellers, taking into account the recommendations, ratings and reports of other users, automatic capping systems of the proposed prices or income received as on Heetch and Blablacar, etc.). These elements, which should involve sampling, require not only legal expertise but also relatively in-depth technical expertise ;
- secondly, and consequently, the nature of the certifiers . Although large audit firms are developing an offering for the platforms, based on their general expertise that is recognised in other areas, other, more modest, actors are adopting a niche strategy, emphasising specific expertise on the subject, such as WeCertify , which highlights in-depth knowledge of the economic models of the digital contact platforms and their legal issues . Currently, the law allows any independent third partyto carry out this certification ;
- thirdly, and therefore, the price of the certification . During the hearings of the Working Group, some large platforms, whose activity offering is diverse, spoke of several tens of thousands of euros per year (the certificate must be renewed every year). In this regard, a much lower amount of a few thousand euros per year would, for a young start-up , be a significant cost .
For the platforms, a lot is at stake: should the certification not be delivered, or if it were proved insufficient or lenient , the legal and financial consequences and in terms of reputation could be significant.
The Working Group therefore makes a series of proposals regarding the certification of online platform operators (see below).
* 47 For example, in February 2017, Airbnb hosts received an email with the recent measures: mandatory registration at the town hall (Act of 7 October 2016 in favour of a Digital Republic), the threshold for compulsory affiliation to the social security (Social Security Financing Act for 2017), secured automatic reporting with regard to taxation (Amending Finance Act for 2016). In some cities in France Paris, Marseille, Nice, Strasbourg and Lyon users receive a reminder of the legislation in force every quarter.
* 48 Until 31 March 2017 for the annual summary, and until 15 May for the 2017 certification.
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Source:
http://tempsreel.nouvelobs.com/rue89/rue89-internet/20150505.RUE8943
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