In a context of increasing digitalization of services, tax legislation is evolving to better regulate online services, particularly those provided to European customers. Since January 1, 2025, a major VAT reform has come into effect in France, directly impacting virtual service providers, including those established outside the European Union.
Recent legislative changes to VAT in France
Article 83 of Law No. 2023-1322 of 29 December 2023 on Finance for 2024 introduces significant changes to the VAT territoriality rules for certain online services. This text aims to transpose Directive (EU) 2022/542 of 5 April 2022 into French law, with a view to achieving tax harmonisation within the European Union.
As of January 1, 2025, the provision of services consisting of providing virtual access to cultural, artistic, sporting, scientific, educational, entertainment or similar events or activities (shows, concerts, museums, sports or distance learning courses, etc.) are subject to new territoriality rules, now incorporated into Article 259 A of the General Tax Code (CGI).
VAT implications for Online Providers
The new rules distinguish between customers according to their tax status:
- Non-taxable customers (individuals) residing in the EU:
VAT is due in the customer’s country of residence. For example, if a company established outside the European Union (e.g., in the United Arab Emirates) provides online courses to French individuals, it will be subject to French VAT.
- Taxable customers (businesses) established in the EU:
The reverse charge regime continues to apply: VAT is due in the country of the customer company, but it is declared and paid by the latter.
Consequences for companies established outside the EU:
Even if a company is located outside the EU, for example in the United Arab Emirates (UAE), the new European tax rules apply if its services are provided virtually to European individuals.
It should also be noted that having a bank account in an EU country does not change this obligation, as VAT is determined by the place of actual consumption of the service, namely the customer’s country of residence.
The services concerned are now clearly distinguished from “classic” digital services (such as pre-recorded e-learning courses without interaction), which remain taxed under the previous rules. However, any service that includes real-time human intervention (video courses, remote coaching, interactive training, etc.) now falls within the scope of the reform.
Risks and recommendations for VAT compliance
The European regulatory trend is clear: it aims to subject to local VAT all services provided to B2C customers domiciled in the EU, even when the service provider is established outside the EU.
In this context we recommend:
- To comply with these new tax obligations which have already come into force.
- Providers who continue to consider certain offers (such as coaching) as not affected by this reform expose themselves to the risk of tax adjustment in the event of an audit.
- It is appropriate to review its invoicing, reporting and VAT collection processes, particularly for sales to European individuals.
Eurotax offers its VAT tax representation service so that you are compliant in the countries where you sell your digital services to individuals.
Please do not hesitate to contact us here for more information.
