The French Overseas Departments and Community VAT legislation
The harmonised rules on VAT do not apply to the DOMs and the application of turnover taxes is a matter for the national or local authorities subject to respect for the general principles of the Treaty on the Functioning of the European Union and, notably, the absence of discrimination in the taxation of products.
The DOMs (other than French Guiana) apply a local VAT system closely resembling the Community system but with certain adaptations (reduced rates).
Moreover, there is a further tax on consumption known as "dock dues" (often referred to by its French name Octroi de Mer), which applies mainly to products from outside the DOMs but which can also be applied to locally manufactured products.
Dock dues are a very old form of tax, several centuries old, which was originally levied on all products arriving in the DOMs by sea.
In principle, the Treaty does not permit differences in taxation between local products and products imported from mainland France or the other Member States. However, the specific nature of the outermost regions, which includes the DOM, is laid down in Article 349 of the Treaty on the Functioning of the European Union, which permits specific measures to be taken, particularly in the tax field, so as to take account of the particular characteristics and constraints of these regions.
Local manufacturers have to contend with a number of handicaps, caused especially by their remoteness, the effect of which is to push up the cost prices of their products, thereby making them uncompetitive with products from elsewhere (especially mainland France and the other EU Member States). This has justified the implementation of a specific measure, which, by means of tax exemptions or reductions for local products, serves to
- encourage productive industrial activity,
- safeguard their competitiveness with outside products, and
- thus increase the proportion of the DOMs' GDP accounted for by industrial activity.
This is why, on a proposal from the Commission, the Council adopted Decision 940/2014/EU of 17 December 2014, authorising the French authorities to apply total exemptions or reductions of the local dock dues tax in respect of a limited list of locally manufactured products specified in the annex to that decision. These tax exemptions or reductions may not result in tax differentials of more than 10, 20 or 30 percentage points depending on the products. The authorisation is valid until 31 December 2020.
This decision therefore permits the application, subject to the authorised limits, of tax differentials between local products and products from outside the DOM.
The decision contains a review clause according to which France shall submit a report to the Commission by 31 December 2017, indicating the impact of the dock dues scheme and its contribution to local economic activities.