Author Archives: Custax

The EUOJ of August 5th 2019 (L 205/16) publishes the recommendation issued by the Commission on July 30th concerning international trade in dual-use goods

This guidance document provides a non-binding framework to assist exporters in detecting, managing and mitigating the risks associated with dual-use goods (DUG) trade controls and ensuring compliance of such exchanges of DUG with the relevant legislation and regulations of both the Member States and the Union.

This document is also intended to support the competent authorities of the Member States in their risk analysis and in the exercise of their responsibility to take decisions on individual, global or general national export authorizations, brokering, transit of non-Community dual-use items or authorizations for the transfer within the Union of dual-use items listed in Annex IV to Regulation (EC) No 428/2009.

This recommendation of the Commission being non-binding; Exporters continue to assume the responsibility incumbent upon them to meet the obligations defined in particular in that Regulation. The Commission, for its part, must ensure that the document remains relevant over time,

Based on the “historical” studies and recommendations R 1540, Wassenaar … this recommendation has the advantage of constituting a European reference to refer to in case of need.

1. Management Commitment to Compliance

2. Organization Structure, Responsibilities and Resources

3. Training and awareness

4. Process and procedures for analytical examination of transactions

5. Performance evaluation, audits, notifications and corrective actions

6. Registration and documentation

7. Physical security and information

 Custax & Legal is available to assist companies either revise their ICP (Internal Compliance Program) to incorporate elements of this recommendation that are not yet included or for those who have not an ICP yet, write one for them that will be based on a prior audit of their flows and organization in the matter.

PARIS, August 5, 2019


On July 11th 2019, the French Senate gave its final approval as to the implementation of a new Digital Services Tax (the “DST”= TSN in French for “Taxe sur les Services Numériques” ) that had been in discussion in the parliament since March. This tax has been voted with immediate effectiveness: France is a “Lone Rider” in this domain; indeed, this new DST has been voted in anticipation for a worldwide solution at OECD and EU levels… that could take a few years.

DST is supposed to be a temporary levy but is nevertheless expected -in this first version- to hit 29 non-French and one French companies and generate some 500 million euros per annum.

The DST will be applicable to gross income derived from certain digital services provided in France for which there is user involvement. The rate has been set at 3% of the “qualifying” revenues. It will only concern companies with worldwide revenues of at least EUR 750M and French “qualifying” revenues of at least EUR 25M.

The digital services in the scope of the DST tax are listed as follows :

  1. Online intermediation services, i.e. services consisting in making available multi-sided digital interfaces to users, allowing users to find other users and to interact with them, and facilitating the provision of underlying supplies of goods or services directly between users. Notable exceptions include intermediation services solely used to provide digital content, communication services or payment services.
  2. Online advertising services, particularly activities consisting in targeted advertising, and aiming at the transfer of users’ data for advertising purposes. Such services may include (but are not limited to) purchasing, storing and advertising, advertising control and performance measurement services, as well as user data management and transmission services.

Banking and financial services are excluded from the scope of DST.

Also note that services provided between related parties are excluded from the scope of the tax.

One should note that on-line linking services whose method of payment is based on a subscription, such as dating websites and computer reservation systems (CRSs), is (against expectations) in the scope of the DST.

However, the French Ministry of Finance is currently working with the operators concerned to “draft a ruling that should secure their situation”. It is also expected that the Tax Guidelines commenting the DST will specify the qualifying criteria to be regarded as CRSs.

What are “qualifying” revenues? The DST base will include all revenues (excluding VAT) over services deemed to have been rendered or supplied in France. Services are deemed to be located in France when the user is located in France (IP address is one of the means of proving this, but all other methods of proof are possible according to the law) or when the account allowing the access to the services has initially been opened in France.

The portion of the revenues attributable to France is extracted from worldwide digital revenues by applying a percentage representing the proportion of the services attached to French-based users.

The tax is due on the basis of French digital service revenues as on 31st December of each year. Taxpayers will be required to make two advance payments, the sum of which must be at least equal to the amount due in respect of the previous financial year: for most large companies, these instalments will be due in April and September, on the basis of the DST due for the previous year.

Companies may opt for a single tax return at the group level. By doing so, the revenue thresholds are added between group members. The “group tax” option is valid for 3 years.

DST is retroactive : for 2019, most companies will be paying one sole instalment, payable in October 2019, computed on the amount of French digital service revenues generated between  January 1st and December 31st 2018, prorated to the number of days between the publication of the DST law bill (expected around July 20th) and October 31st, 2019 (i.e. approximately 103 days out of 365).

In the event of an audit, taxpayers must be able to provide within 2 months, all documents detailing sums collected, by category of services provided in and outside France.

The statute of limitation for this DST tax is of six years, as opposed to the standard 3 years applicable to most commercial taxes in France.

If the liable entity is not established in the European Union or in any other State party of the European Economic Area, it must appoint a tax representative to pay the DST in its place.

Custax & Legal offers such service.

On the legal level, DST raises many questions. By taxing turnover, it has an obvious cyclical character. It can hit companies that are losing money. It can also lead to double taxation for many companies that already pay taxes on the profits they make in France. Parliament indicates that the purpose of this tax is not to add additional taxation to a company that already pays tax, but rather to attract to France tax revenues that otherwise fall out of the French taxation scope.

DST also poses the question of whether it can be regarded as a VAT-assimilated tax, on which the EU has exclusive legislative power. Every portion of the DST has been drafted under the conditions of VAT, subject to the same procedures, period of calculation, audit conditions and guarantees tax representation conditions, etc.

Parliament has flagged the fact that smaller companies not paying the DST may be regarded as having received an unlawful subsidy (which is contrary to EU “state aid” regulations).

Since DST applies under specific conditions to a small number of companies, a vast majority of which are not French, it might well be regarded as discriminatory…
The fact that the tax basis is highly difficult to assess, in terms of revenue extraction calculation and territoriality, might entail that DST be regarded as being unlawful since tax laws are -under the French constitution- required to be understandable (under the  principle of “intelligibility”).

Finally, one should note that DST may not be deducted from Corporate profits.

Indeed, the French government has decided this on purpose: had it been deductible, it would fall into the scope of double-tax treaties … which is precisely what France wanted to avoid.

DST is out of the scope of all double tax treaties signed by France, so the tax territoriality principles under the treaties do not apply to DST and DST cannot benefit from any tax credits.

There has been advanced discussions about partially compensating DST against the “C3S” tax. However, such discussions have been abandoned since they were regarded as “too complex” and a potential legally obstacle to validating the tax.

Custax & Legal expert tax team will be happy to assist and further comment on any if the above points should you so require.


Tax & Customs lawyer  

Paris July 19th 2019

Of the coexistence of the VAT Tax Representation with the PAS Tax Representation

Foreign companies employing staff working on the French territory (notably in the context of international assignments) have had to adapt during the last semester to the implementation of the new withholding tax on income tax (PAS). ).

PAS does indeed require foreign companies not established in France but paying remuneration to employees based in France:

• That they think their strategy of deployment of this reform in view of their overall tax situation;

• That they carry out the preliminary administrative formalities allowing them to fulfill their declarative and payment obligations;

• Adapt their IT systems, including for international payments (both SEPA and non-SEPA countries), so that they can meet their new obligations in practice.

Foreign companies falling within the scope of the SAP Act may send personnel to France from different legal entities of the same group and / or from different countries. Given their specific characteristics, they will have to define an effective strategy that will allow them both to comply with the regulations and to control their costs.

Non-established foreign companies that pay employees based in France must make themselves known and register with the tax authorities in France. Without this preliminary formality and the obtaining of a SIRET number, they will not be able effectively to fulfill the obligations incumbent on them since January 1st, 2019 with regard to the withholding of the tax on the income of their employees. In practice, the registration process takes several weeks (6 to 8), the processing time by the tax authorities being a little longer than normal in 2019, given the number of applications for registration.

These foreign companies must seriously address the issue in order to meet their obligations. In the first place, adjustments to the information and payroll systems as well as the allocation of dedicated resources are to be anticipated … even if part of the task will necessarily – in their case – be outsourced : the provisions of Article 1671 -1 of the French General Tax Code (CGI) require them to appoint a tax representative for this purpose.

As an indication, in 2015 (source INSEE), 28,100 foreign companies employed nearly 1.8 million employees in France.

In addition, a number of these foreign and non EU companies that did not have any income tax liability in France so far, had -before 2019- a VAT registration either because of reporting obligations or because of the carrying out of taxable transactions in France for which they were liable for this VAT. These companies were required in this case to appoint a tax representative VAT (ART 289 A of the CGI) who – subject to his accreditation -had to proceed with  the registration of the foreign company with his own local tax center.

However, pursuant to the combined provisions of the new Articles 1671-1 and 302 of the CGI on the one hand and 111 quinquies of Appendix III to the CGI on the other hand, all tax representations are, in such a case of the cumulative VAT and PAS obligation -centralized for their management at the tax center of non-residents of the DINR (Non-Residents Tax Directorate) located in Noisy le Grand.

VAT tax representation tax records are automatically (as soon as the foreign entity is registered for the PAS[1] (with its SIREN number assigned for VAT tax representation at the origin) transferred from the local tax center of the tax representative to DINR at Noisy le Grand, without any demand to be made by the tax representative at his local agency.

Despite the fact that his former VAT accreditation remains valid, the fiscal representative will nevertheless have to apply for his “PAS”  accreditation with the DINR.

If we understand the approach of the tax administration to reinforce the controls by centralizing the files (with a probable temptation of controls to demonstrate the existence of permanent establishments), one is entitled to fear a deterioration of the quality of communication between the users (foreign companies and their tax representatives) and the administration as the communication with the DINR is long-term-deemed difficult to reach because of its congestion with regard to the ratio of workload / number of officers of this agency.

Finally, the VAT accounting audits of a US company whose tax representative is , for example, based in Toulouse are no longer conducted by the inspectors of the SIE  tax agency of Toulouse but by the agents of the DINR  based in Paris suburbs (entailing substantial costs of control of travel and accommodation) .

Everything suggests that these checks will be done more and more based on transmitted documents and in a dematerialized digital way …

Paris, March 18th 2019

Bertrand Rager

[1] Via the on-line site dedicated to filing social returns:

FRENCH EXPORT CONTROL…TOUGHER CONTROL AND FINES : urging to improve your procedures and internal control !

The French Decree 2017-151 dated Feb 8th 2017 strengthens – in a context of anti-terrorism- the power of the agencies of control so that they may, in case of failure or defaulting of the organization and internal control processes of exporters of military equipment or of suppliers of products in relation with Defense

  • Issue summons or even decide of the suspension, modification or abrogation of existing Export Licences
  • And enforce (by the Sanction Committee, new creation of this Decree) financial fines.

Companies operating in this economic sector have no other option (but deciding to take enormous legal, financial and commercial risks) to set up a perennial and competent (i.e with permanent education) dedicated organization of operations  coupled with an internal control concerned  with compliance to this legal environment.

One may recall that in conjunction with both the dual goods regulations (the frontier of which with military equipment is so thin sometimes that it is dangerously subject to interpretation) and the Customs law, the potential toxicity of which is well known, this set of regulations (reinforced by the impact of this Decree on the provisions of the French code of Defense) now constitutes a multi-layer legal tool, the dangerous character of which is a challenge  not only for the top management (authorized signors) and heads of Compliance but should also raise some concern among Supply-Chain and HR directors.

May 1st 2016 : Labour day, Orthodox Easter… and enforcement of the European « Union Customs Code » (UCC)

« Le code des douanes [1]est mort, vive le code des douanes[2] » !

In compliance with the norms imposed by the Lisbon Treaty[3] ,the UCC [4] (published in  2013 ) is completed by both a Delegated Regulation[5] and a Commission Implementing Regulation [6] (both published in late 2015).

This new corpus of nearly 1,400 pages will henceforth rule the customs treatment of the flows of goods which reflect the global trading of this teen-aged XXIst century.

This initial idea calling for a new Customs Code for the EU  was dual :

–          Improving the operation of the European Customs Union (with 28 Member States) which faces too many internal implementation disparities when enforcing the same text and uneven means and performance as far as controls are concerned.

–          Render the International Supply-Chain safer (see the WCO’s SAFE program).

The ambition of the UCC is to reach this goal by :

1° investing in the full dematerialisation of exchanges (E-Customs), based on the inter-operability of the 28 Customs authoritirs’ IT systems, planned for Dec 2020…

2° rendering the AEO[7] certification a more an more required pre-requisite for the operators of international trade, since the UCC provisions reserve a certain number of Customs facilitations to the sole AEO certified operators.  [8].



 -Centralised Clearance (CC) [11] which permits [12] to declare with one single Customs authority in the EU the overall flows of the pre-defined perimeter (n Member States plus France for a French based company) ;

– Self Evaluation[13] of the amount of duties and taxes due upon importation ;

– Setting up a single global guaranty so as to reduce its cost ;

– The single window principle

– The possibility of filing its one’s Customs declaration by simply posting the movement in one’s customs books

– Lighter Customs audit process (advance notification, choice of place of ausit, possible planning, etc…)


The Unique Consignment Reference (UCR)[14]: uninterrupted surveillance, tracing and audit tool , better cooperation between Customs authorities, better tracing of its supply-chain by the operator.

Notorious change of two provisions relating to Customs Valuation[15] :

–          The use of the « first sale » price is no longer permitted (« première vente »)[16]

–          Royalties for brand licences must now in most cases be integrated in the  Customs value.

Changes relating to Binding Information (Tariff or Origin) (BI):

– Period of validity now limited to three years[17]

– A BI is now binding for both parties : the Customs authorities AND the operator.

– The conditions of issuance of BIs is now harmonized.

– One operator may now only apply for one BI for a given item throughout the EU : Member State’s Customs have 120 days to reply.

– Reference to such BI must be made in the importation declarations (in box 44 of the SAD) [18].

BI issued prior to May 1st 2016 become binding for their holders as from May 1st 2016. (with henceforth mention in box 44 of the SAD) .

Changes regarding Special Procedures[19] (SP)

–          Process under Customs control is now part of the Inward Processing Relief (IPR) Customs SP

–          The IPR Special Procedure [20] no longer imposes the obligation to re-export[21]

–          The End-use[22] becomes a Special Procedure[23]

–          The delay for issuing an authorization for a special procedure is now 2 months in France( 3 months for Customs Warehouse)[24].

–          The beneficiary of the TRANSIT (SP) now has to satisfy criteria close to the AEO criteria[25] ; Transit SP might enjoy the benefit of declarations by anticipation and electronic transportation documentation.

–          As far as the Customs Warehousing function is concerned :

  • The type D private warehouse no longer exists, type C and E still exist. One is no longer required to justify his need for warehousing.
  • The Free Zone  is now a Special Procedure. Free warehouses and Free Zone of type II no longer exist.
  • Good in temporary storage  must either be placed under a customs procedure or be re-exported within 90 days.

–          The placement of the goods in Free Circulation when discharging Temporary Admission or Inward Processing Relief no longer entails the payment of interest.

–          A guaranty is now required for all Special Procedures with an amount of referecne and a defined rate.

Changes regarding CUSTOMS REPRESENTATION : end of the monopoly (in France) for Direct Representation of agreed Customs brokers.

Any Customs representative may now, if he is a certified AEO, operate thoughout the EU.

This competitive market might reveal advantageous for the operators…

Changes regarding the STATUTE OF LIMITATION

In the French penal oriented customs context, the enforcement of the UCC extends the statute of limitation regarding customs duties to 5 years[26].

The statute of limitation regarding other taxes (of which VAT)  remains 3 years.

A particular case of exension of these statutes of limitation up to 10 years has been created « in case of the discovery of facts in the context of a court  litigation or administrative procedure »

The prescription of penal condemnations (including tax fines) remains 3 years.

Other  Changes

–          The criteria retained to define which Customs authority is competent for a given customs issue have been slightly modified (place of storage, of  inward processing  or place where commercial customs postings & books are kept)

–          The notion of Suspension[27] of a decision has been added to those of revoking and  annulment.

–          A restriction has been made to the conditions for granting retroactivity : the UCC provides 3 types of retroactivity with certain changes (Notably to the date of approval of an application and no longer to its date of filing with the authorities).


Considering the importance of participating Member States and given the size of the project, a transitional period  terminating on December 31st 2020 has been provided by the texts .

During this period the 28 Customs authorities and the EU Commission will work at tuning the interconnexion of their respective IT systems[29], necessary prerequisite for the operability of the UCC new procedures.

Existing granted procedures remain valid until their expiration or review and until May 1st 2019 at the latest.


With a going concern consideration of their international trade operations, operators, wishing to have a lean supply-chain operating in a compliant environment now have :

–          To review accordingly and adapt their processes and procedures,

–          To perform an up-dating/cleaning of their contracts,

–          To conduct an analysis so as to have a visibility on their volumes and related risks.

Me Bertrand RAGER


April 27th 2016

[1] Community Customs (1992)

[2] Union Customs Code (2013-2015)- CDU ( Code des Douanes de l’Union) in French.

[3] (Articles 289, 290 et 291 of the TFEU)

[4] Regulation (EU) 952/2013 Oct 9th  2013 (EUOJ L269 dated October 10th 2013)

[5] Delegated Regulation (EU)  2015/2446  July 28th 2015 (EUOJ  L 343 dated  December 29th 2015)

[6] Commission Implementing Regulation  (EU) 2015/2447 November 24th 2015 (same EUOJ of Dec 29th 2015)

[7] Art 38 & follow. of the UCC

[8] Hardly 1.500 AEO in France to-day as opposed to nearly 6,000 in Germany out of a total of 13.000 AEO for the whole EU.

[9] NB : All comments made herafter express the author’s French point of view which may need to be adapted to the implementation/interpretation made by the reader’s own EU Member State’s Customs authorities…

[10] Who will henceforth have to justify  having internal competence(s) in Customs law and their penal history will now also be taken into account when considering their application for an AEO certification…

[11] Art 179 of the UCC

[12] This presupposes indeed on the one hand that the efficient interoperability of the 28 Member States’ Customs’ IT systems be in place and, on the other hand, that these 28 MS Customs authorities have a more cooperative than competitive attitude… which is not obvious considering the budgetary impact of such Centralised Clearance.

[13] The enforcing details of which remain to be defined

[14] RUE (« Reference Unique d’Envoi » ) in French

[15] Art 69 and follow. of the UCC

[16] The principle established by Art 147.1 of the 1992 CCC’s IP ) thereby disappears.

[17]  5 years under the CCC provisions

[18] Omitting this element will entail sanction for « maneuver with the purpose of reducing the taxation »

[19] Ex « Suspensive arrangements and customs procedures with economic impact »

[20] Art 256 of the UCC

[21] De facto avoiding the payment of interest

[22] « Destination Particulière » in French

[23] The T5 procedure disappears ; it is now possible to export eventhough End-Use has not been satisfied; the  notion of equivalence has been extended to End-Use.

[24] 120 days  if involves several Member States .

[26] Using the issuance of notices to interrupt the computation of the statute of limitation may no longer extend enquiries beyond the 10th year (plus the current year) following the incurrence of the customs debt.

[27] Article 16 of Delegated Regulation  2015/2446

[28] Delegated Regulation  2016/341 (33 pages of text and some 280 pages of annexes) and its rectifications (example : Regulation 2016/651)

[29] See Commission Implementing Regulation 2016/578 dated April 11th 2016