Facebook to pay France more than $118 million in back taxes

France has argued that big tech is paying too little in taxes in the country

Facebook's French subsidiary has agreed to pay more than $118 million in back taxes, including a penalty, after a 10-year audit of its accounts by French tax authorities, the company said on Monday.

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France, which is pushing hard to overhaul international tax rules on digital companies such as Facebook, Alphabet’s Google, Apple and Amazon, has said the big tech groups pay too little tax in the country where they have significant sales.

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FBFACEBOOK INC.252.53-2.29-0.90%

Current international tax rules legally allow companies to funnel sales generated in local markets in Europe to their regional headquarters. Some of the tech companies, including Facebook, have European or international headquarters based in countries with comparatively low corporate tax rates, such as Ireland.

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A Facebook spokesman said French tax authorities carried out an audit on Facebook’s accounts over the 2009-2018 period, which resulted in an agreement by the subsidiary to pay a total of $125 million.

The Facebook spokesman did not elaborate further on the details of the agreement. France’s tax administration also did not give more details.

The logo for social media giant Facebook at the Nasdaq MarketSite in New York's Times Square. (AP)

Facebook’s spokesman also said that since 2018 the company had decided to include its advertising sales in France in its annual accounts covering France.

As a result, Facebook’s total net revenue almost doubled in 2019 from a year earlier to $881 million, a copy of Facebook France’s 2019 annual accounts, filed with France’s companies registry and seen by Reuters, showed.

Facebook France, which employs 208 people, refers to the French tax audit report in its 2019 annual accounts, saying it amounted to a tax adjustment of about $124 million. This includes a penalty of about $26 million, the annual accounts showed.

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French magazine Capital was first to report the payment of back taxes.

Facebook’s spokesman said that the company paid $10 million of income taxes in 2019 in France, an increase of almost 50% from a year earlier.