French tax authorities had accused Google of illegally routing sales in France through Ireland and not paying the higher corporate taxes.
The judges however ruled that Google’s European headquarters in Ireland could not be subject to corporate and value added taxes in France.
“Google Ireland isn’t taxable in France over the period 2005-2010,” the court said in its terse statement.
The ruling can still be appealed but the ruling is a blow to French tax authorities which had counted on a real windfall.
After Google reached a £130 million settlement in the UK last month, the then French finance minister Michael Sapin declared there would be a “way bigger” payment in France. The French tax administration, he said, “does not negotiate the amount of taxes owed. It applies the rules.”
The French court decision would be a relief for Google which was fined a record $US2.7 billion by European anti-trust officials for unfairly favouring some of its own services over those of rivals.
“The French Administrative Court of Paris has confirmed Google abides by French tax law and international standards,” Google said in a statement. “We remain committed to France and the growth of its digital economy.”