A France-based court sided with Google in a tax case in which the country’s tax agency asked the tech giant to pay $1.27 billion in due taxes. Even though the decision applies only to Google, it could set a precedent for other European countries.
The case stems from an old dispute between France’s government and the web search giant. French authorities believe that the revenue obtained from selling ads to French firms was made in France and it should be taxed under the French law.
As a result, the French government slapped Google with a $1.3 billion tax bill for advertisements it had sold in the country from 2005 to 2010. Google contested the decision and sued the country.
The company argues that it sold the ads on Irish territory, while its French offices provided only logistical support. French authorities rejected that argument, labeling the firm’s business infrastructure as “fictitious”.
France Plans to Appeal
According to The Wall Street Journal, France plans to appeal the ruling. However, Paris’s administrative tribunal clearly stated Wednesday that the U.S. company had no “taxable presence” on French territory. This means Google doesn’t have to pay sales or income taxes on the advertising services it provided to its French customers.
French Budget Minister Gérald Darmanin said the country’s regulators would analyze the ruling and appeal it. Darmanin underlined the role of French workers for Google’s advertising business in France.
If the ruling stands, it could set a precedent throughout the European Union since European countries are advised to abide by a common set of corporate tax rules. In other words, other European courts may help foreign companies defeat local tax regulations.
Additionally, the French decision could put at risk the tax agreement between Google and the U.K., which some experts think it is bordering on illegality.
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