French court rules Google not liable for €1.1bn disputed taxes

Google will not face a €1.1bn (£970m) bill in France after Administrative Court of Paris rejected claims by the country’s tax authorities that the search engine and technology giant exploited loopholes to divert profits abroad, reports Calum Fuller

Google employs 700 people in France, but advertising contracts sold for display in France are booked through its subsidiary in Ireland, where the corporation tax rate is 12.5%. The French standard rate is 33.3%.

The court ruled Google Ireland did not have permanent establishment or sufficient taxable presence in France to justify the bill. The French government can appeal the ruling.

Google said in a statement to CCH Daily: ‘After a thorough review by the Public Rapporteur, the French Administrative Court of Paris has confirmed Google abides by French tax law and international standards. We remain committed to France and the growth of its digital economy.’

The OECD has been examining permanent establishment and its role in tax avoidance as part of its Base Erosion and Profit Shifting (BEPS) project.

Its draft guidance issued in June 2017 focuses on how the rules of Article 7 of the OECD Model Tax Convention would apply to permanent establishments, in particular those outside the financial sector, as well as how BEPS Action 7, would interface with rules on transfer pricing, in particular to intangibles, risk and capital.

Transfer pricing sees an ‘arm’s length’ principle applied to the prices paid for assets in intra-group deals, so that a market value price is paid.

In the UK, Google paid HMRC a £130m settlement after a similar dispute over booking sales through Dublin. In 2015, the Diverted Profits Tax was introduced by then-Chancellor George Osborne. It imposes a 25% charge on taxable profits that have been diverted from the UK.

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