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  • Service: Tax, Global Indirect Tax
  • Type: Regulatory update
  • Date: 11/1/2012

France: VAT essentials 

Essential information regarding VAT as it applies in France.


Scope and rates

What supplies are liable to VAT?


Value-added tax (VAT) is due on any supply of goods or services made in France, where it is a taxable supply made by a taxable person in the course of economic activity. Economic activity is a term deemed to include not only industrial, commercial and agricultural activities in a legal framework, but also the supply of professional services and other activities which are classified as civil.


Supply does not include anything done otherwise than for a consideration. However, certain transactions are VAT taxable according to specific French legislation. Some example as follows:


Self-supplies (livraisons à soi-même) which consist of: 


  • the supply of goods/services for non-business purposes (private use), for a non-VAT-taxable transaction, or for a taxable transaction if the input VAT is restricted or cannot be recovered 
  • the use of goods extracted, manufactured, transformed, or built by the entrepreneur, which are used for business purposes
  • giving business gifts and samples when certain thresholds are exceeded.

What is the standard rate of VAT?


The standard rate of VAT is 19.6 percent.


Are there any reduced rates, zero rates, or exemptions?


Yes.


  • There is a reduced rate of 5.5 percent for certain goods and services, including notably:

    • food products and beverages (except alcohol beverages)
    • water
    • self-supply of specific residential unit made by defined non-profit making organization (social residential unit which comply with different requirements: elderly residential unit, residential unit for disabled/impaired person)
    • subscription fees for delivery of heat energy when this energy is produced with 50 percent of sustainable resources
    • services provided in school cafeteria
    • medical devices for disabled person
    • sales and rentals of books, including digital books (as from January 1st 2013)

  • There is a reduced rate of 7 percent as from 1 January 2012 for certain goods and services, including notably:

    • some pharmaceutical products
    • sales and rentals of books, including digital books (until December 31st 2012)
    • some radio and television broadcasting
    • some entertainments (cinema, theatre, museum, and exhibitions). Some entertainments (notably theater) will be subject to the 5.5 percent VAT rate as from 1 January 2013  
    • transportation of passengers
    • works on residential units
    • hotel accommodation
    • writers and composers
    • meals taken away.

There is also a reduced rate of 2.1 percent for certain goods and services, including:


  • newspapers
  • admissions to shows  (applicable only for the 140 first performance of the show)
  • medicines for human health (when reimbursed by social security).

It is worth noting that special VAT rates apply in the French overseas departments (Martinique, Guadeloupe, Reunion Island), as well as in Corsica. VAT is temporarily not applicable in French Guyana.


The list of exemptions includes:


  • exemptions with no input tax recovery (exempt supplies), such as:

    • certain medical supplies 
    • certain Postal services 
    • education 
    • charities 
    • certain financial transactions 
    • insurance 
    • betting, gaming, and lotteries

What are the other local indirect taxes beside VAT?


Yes, for example: excise duties, insurance premium tax etc. Several different indirect taxes may be applicable in France, notably in certain specific industries (e.g. tax on advertizing -“taxes sur certaines dépenses de publicité”, tax on television sets - “contribution à l’audiovisuel public”, tax on oil for human consumption - “taxe spéciale sur les huiles”, etc.)

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Registration

Who is required to register for French VAT?


French Entities


If a business makes taxable supplies in France for which it is liable to pay VAT or to VAT/Intrastat formalities it will be required to register and account for French VAT. However, entities established/incorporated in France may be exempted from registration if their supplies were, the previous year, less than (amounts tax excluded) EUR 32,600 or EUR 34,600 (but under condition that N-2 was less than EUR 32,600) in respect of services or EUR 81,500 or EUR 89,600 (but under condition that N-2 was less than EUR 81,500) in respect of goods.


To commence an activity in France, every entity needs to have a SIRET number. When a business files the M0 form (declaration of existence) for its commercial registration, the entity is also given a VAT registration number. Therefore, in this way, French businesses are automatically registered for VAT in France.


Non-French Entities


The registration rules that apply to French entities also apply to non-French entities which are making taxable supplies in France for which they are the VAT taxpayer. However, for non-resident entities, no VAT registration threshold exists.


In case of intra-EU deliveries performed from France, the non-French entities should register for VAT and for Intrastat purposes.


Where an entity is from a European Union (EU) Member State in order to deal with its VAT, the EU business must register for VAT in France and may choose to appoint a VAT agent which has no liability to the tax authorities.


Non-EU Entities


To deal with their VAT affairs, non-EU businesses which are not established in France must register for VAT in France and appoint a VAT representative who is a VAT-taxable person in France, duly accredited by its tax office, to act as a VAT representative and who agrees to pay the tax and perform all necessary administrative formalities on behalf of the foreign business.


Should the VAT representative default in its obligations (or should the foreign business simply fail to appoint a VAT representative), any person involved in the transaction, including the French customer may be forced to pay the tax along with any penalties.


If a business is not registered for VAT in France but sells and delivers goods from an EU country to customers in France who are not VAT registered (distance sales), where the value of those sales exceeds a VAT exclusive threshold of EUR 100,000 (as of April 2004), it is required to register and account for French VAT.


Are there penalties for not registering or late registration?


Non-registration or late registration, where it is mandatory, may be subject to the following penalties: 


  • 0.4 percent interest rate per month (4.8 percent per year) on the VAT arrears.
  • surcharge of 10 percent of the VAT arrears and 80 percent in case of fraud (undisclosed activity).

The statute of limitation for the tax authorities in France is three years.


A specific extended statute of limitation exists in the absence of registration revealing a hidden activity or permanent establishment.


Are there any simplifications that could avoid the need for an overseas company to register for VAT?


Domestic sales


As from 1 September 2006, if a business (non-established in France) makes a domestic sale of goods or services to a French VAT registered client, VAT must be accounted for by the French customer.


This rule is subject to a limited number of exceptions:


  • transactions subject to VAT on margin
  • leases of bare premises or farm land and buildings subject to VAT on election
  • construction leases and all transactions relating to real estate operations.

The French VAT registration of a company may, however, remain necessary for certain supplies of goods (such as exportations, intra EU deliveries of goods).


As from 20 June 2012, a company which is not established in France performing intra-EU acquisition may not necessary be required for filing an intrastat return. Indeed, the person liable for filing such return in France has been modified in the following cases:


  • in the case of  a sale of goods with installation, the purchaser of the goods, VAT registered in France is now liable for filing the Intrastat return if the supplier is a company which is not established in France
  • in the case where goods are transported into France from an EU member state by a company not established in France and then sold to a French company, the person liable for the Intrastat return is the supplier not established in France if it is VAT registered in France for the sole purpose of the intra-EU acquisition, or the purchaser of the goods, or the company which held the goods (e.g. warehouse keeper).

Reverse charge services


The scope of reverse charge has been greatly extended as from 1 September 2006 to all the services performed by a non-established company to a customer liable to VAT in France. These services are covered in more detail above under “Domestic sales” and at section “International Supplies of Goods and Services”.


Additionally, a new reverse charge mechanism was introduced on 1 April 2012 for domestic supplies of gas and electricity between a supplier established in France and a customer registered for VAT in France. As well, on 1 April 2012, a reverse charge mechanism of the VAT due on electronic communication services performed between companies established and registered in France for VAT purposes was implemented. Both new domestic reverse charge mechanisms were implemented in order to limit VAT fraud in these two specific sectors (as several cases of carousel fraud have been identified by the French tax authorities).


Since these provisions are subject to particular requirements, companies should check carefully whether they comply with them.


Importation of goods


Foreign entities non-established in France performing imports of goods in France followed by a domestic sale to a French VAT registered client liable for VAT in application of the reverse-charge mechanism do not need to be VAT registered for the purposes of paying the VAT at import. Furthermore, as from 1 July 2009, such entities should have an EORI number in application of the 312/2009 settlement of the European Commission. However, non-EU companies must appoint a VAT representative.


Triangulation


If a business is an intermediate supplier VAT-registered in the EU to a French buyer of goods purchased from a business in a Member State (other than its own and France) and are delivered from there to France, VAT due can be accounted for by the French customer.


Call-Off Stock


Where a company stores goods in France at its customer’s premises or anywhere else in France, the French VAT-registered customer accounts for VAT on the supply as an intra-Community acquisition provided that the transfer of ownership of the goods to the purchaser occurs within three months from the date of arrival of the goods in France.


If the three-month time length is not respected, the foreign supplier would need to VAT register in France the intra-Community transfer of goods should be VAT exempt (if the foreign supplier does not carry out other taxable operation in France or VAT-exempt transaction to be declared on a French VAT return) and the French VAT registered client would apply VAT under the reverse charge mechanism on the subsequent domestic purchase.


Supply and Install


As from 1 September 2006, the reverse charge mechanism applies to the supply and installation of goods performed by a supplier not established in France to a customer liable for VAT in France.


Is voluntary VAT registration possible for an overseas company?


Voluntary VAT registration is not possible in France.


Does an overseas company need to appoint a fiscal representative?


Only non-EU companies will have to appoint a “fiscal representative” when registering for a French VAT number. EU companies have the choice between direct registration and registration through the appointment of a fiscal “agent”. The main difference between the “fiscal representative” and the “fiscal agent” is that only the former is jointly liable with the principal for the payment of all taxes and penalties to the French tax authorities.

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VAT grouping

Is VAT grouping possible? 


Not currently. However, businesses that are geographically separated but form legally one unit, such as, companies having branch offices in other parts of France, are treated as one taxable entity.


However, France has adopted a system under which groups may elect, under specific conditions, to consolidate the payment of VAT (amended 2010 Finance Act of December 29, 2010), which has entered into force on 1st January 2012.


The consolidation mechanism applies to VAT payments, not VAT returns. Accordingly, the group’s head company will report and pay the net amount of the group’s VAT or, as the case may be, request reimbursement of any VAT credit generated by the group (it will also pay the other accessory taxes and contributions attached to VAT returns). The group’s member companies have to continue filing their monthly VAT returns as required under general law and will remain jointly liable for their share of the VAT and accessory taxes.


Under this regime, transactions between the group’s companies remain subject to VAT under the general rules of law.


In addition, according to Article 261 B of the French Tax Code (FTC) implementing article 132.1.f of the Directive 2006/112/CE , certain services rendered to their members by different kinds of partnerships (in particular by an Economic Interest Grouping), may be exempt from French VAT if several conditions are met. The deliveries of goods are not subject to said provisions. These conditions are quite complex and described in the Doctrine published by the French tax authorities, to which it should be referred.


Can an overseas company be included in a French VAT group?


According to a ruling published by the French tax authorities on their web site in 2007, the latter seems to authorize that, under article 261 B of the FTC:


  • a foreign tax resident belong to such a kind of partnership and
  • the partnership itself could be a foreign tax resident.

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Returns

How frequently are VAT returns submitted? 


With the exception of smaller businesses which are taxed on an official estimation system (micro-enterprises), every business liable for VAT must file a monthly VAT return. The exact day of the month for filing the declaration is established according to a national calendar based on taxpayers' names and registration numbers (generally around the 20th of each month but 19th for EU companies which have no permanent establishment in France).


Quarterly VAT returns may be submitted if the total VAT payable each year does not exceed EUR 4,000.


Under specific conditions, some companies may benefit from a “seasonal” filing regime which would allow filing VAT returns only in respect of month during which transactions are performed.


Are there any other returns that need to be submitted?


  • European Sales List (ESL)
  • Intrastat Supplementary Declarations

In France, ESLs and Intrastat supplementary declarations are merged into a single form called “Déclaration d’Echange de biens”. However, businesses must establish two monthly returns, one for dispatches and the other for acquisitions. Returns should be submitted on a monthly basis, the level of detail your business is required to provide is dependent upon your annual turnover.


  • European Services List  « Déclaration Européenne de Services » (DES)

As from 1 January 2010, taxable persons should file an EC sales list for sale of services to EU clients (if at least one operation is to be reported) when the following conditions are fulfilled:


  • service rendered to a business established in an EU country
  • service falling under article 44 of Directive 2006/112/EC (place of taxation at place of establishment of the recipient)
  • service not VAT-exempt in the country of taxation (i.e., place of establishment of the recipient).

It should be submitted monthly electronically on a form which is different and separate from ESL and Intrastat Supplementary Declaration.


If a business receives a purchase invoice in foreign currency, which exchange rate should be used for VAT reporting purposes? (e.g. central bank’s exchange rate applicable on the date of the invoice)


When an invoice is issued in a foreign currency, Article 266-1bis of the French Tax Code states that the exchange rate to be applied corresponds to the exchange rate determined and published by the France’s Central Bank  (“Banque de France”) ), which is based on the exchange rate of the European Central Bank, at the date of tax point.

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VAT recovery

Can a business recover French VAT if it is not registered for VAT in France?


Yes. Businesses established in another EU Member State should make a claim under Directive 2008/9/EEC of 12 February 2008.


A non-EU business should recover the VAT under the 13th Directive (Article 2242-0 Z quarter of Appendix II of FTC).


Both VAT refund procedures are applicable if the following general conditions are satisfied (additional conditions could be required depending on the VAT refund procedure applied):


  • the foreign company is not established in France pursuant to Articles 242-O M of Appendix II of FTC
  • the foreign company is not liable to the declaration of French VAT taxable transactions implying the filing of French VAT return
  • the expenses charged with French VAT are incurred for transactions giving rise to a VAT recovery right.

Under both of these provisions there are strict time limits for making claims. Since 1 January 2010, the claim should be filed at the latest (date the French tax authorities receive the claim):


  • by EU companies (Directive 2008/9/EEC of 12 February 2008) on 30th September of the calendar year following the one referred to in the claim. Regarding this procedure, please note that as from 1st January 2010, taxable persons not established in the Member State of refund but established in another Member State obtain refund of the input VAT incurred via an electronic portal developed in their own Member State of establishment.
  • by non-EU companies (13th Directive): on 30 June of the calendar year following the one referred to in the claim.

The refund period shall not be more than one calendar year or less than three calendar months. Refund applications may, however, relate to a period of less than three months where the period represents the remainder of a calendar year (article 16 of Directive 2010/66/EU; article 242-0 T of ann. II of CGI).


The French tax administration, just as other Member States, had limited the number of refund applications to be submitted by calendar year: 5 applications per calendar year i.e.: 4 applications concerning a period not shorter than 3 months, except at the end of the year and 1 complementary application concerning the entire calendar year.


However, following an opinion of the European Commission according to which the right to deduct VAT cannot be limited by the Member States applying their own refund modalities and therefore, the taxpayers should be allowed to submit more than 5 refund applications.


Consequently, the submission of more than 5 refund applications through the French electronic portal is from now on admitted. However, the rules that it should be filed after 3 months or at year-end remain.


It should be noted that France has specific rules to determine the date of recovery of VAT. For services, it is not the time of issuance of invoice but the date of payment. This may lead some foreign companies to wrongly leave out some invoices (pre-payment) or to face rejection for early submission.


Does your country apply reciprocity rules for reclaims submitted by non-established businesses?


In practice, no.


Are there any items that businesses cannot recover VAT on?


Yes. There are certain items that businesses cannot recover VAT on. Examples (non-exhaustive list): 


  • Exempt supplies (e.g. financial services): where VAT relates to both taxable and exempt supplies, businesses need to recover the input VAT using a partial exemption calculation.
  • Goods and services which are not necessary for the running of the company (private use).
  • Hotel expenses incurred by the foreign companies' executives or employees, during a stay in France, even if for business reasons.
  • Vehicles (transportation of persons including cars, motorcars, motorcycles, ships, aircrafts) where they are booked as fixed assets in the company's accounting or where said vehicles are not planned to be sold as new vehicles. Components, spare parts and accessories to be incorporated in those vehicles as well as services rendered in respect of them. Exceptions: public transport companies, transportation of personnel to the work site, vehicles for leasing purposes, vehicles for driving training, vans, lorries, some aircraft used for commercial purposes only, and other vehicles not used for travelers transportation.
  • The transport of persons and ancillary services (although this exclusion does not concern transport service suppliers, acting either on behalf of a public passenger transport enterprise, or under a permanent transport contract entered into by enterprises to have their personnel taken to their place of work).
  • Motor fuels except diesel which, if used solely for business purposes, may be claimed:

    • at either 80 percent if it concerns vehicles for which VAT cannot be recovered, that is, tourism cars; or
    • at 100 percent if it concerns vehicles for which VAT is recoverable (such as lorries and vans).

  • Goods supplied to another company or person without remuneration or against a remuneration that is much lower than their normal price, except if it concerns goods provided to a customer as a gift, with a very low value (less than EUR 65, VAT included, per customer and per year).
  • Purchases falling within the Tour Operators Margin Scheme: the VAT on goods and services which fall under the scheme cannot be claimed.

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International supplies of goods and services

How are exports/intra-EU of goods and services from France treated? 


Goods


If a company sells goods to a customer who is registered for VAT in another EU Member State and the sale involves the removal of those goods from France (either by the seller or its customer) to that Member State, then it does not need to charge VAT and may zero rate the supply as an intra-EU dispatch. The seller must obtain your customer's VAT number and quote it on its invoice. It should also obtain evidence of the goods' removal from France (transport document, delivery slips, etc.) and ensure that it could be aware of any fraud (e.g. demonstration that the client has an effective activity).


If a business sells goods to a customer who is not registered for VAT in another EU Member State (i.e., non-taxable person), it must charge French VAT. If the sales exceed a certain threshold for that Member State companies may have to register in the Member State under what is known as the Distance Selling Scheme.


If a business exports goods to a customer (business or private) outside of the EU then it does not need to charge VAT but, as for intra-Community sales, it should make sure that in all cases it keeps proof of dispatch/delivery to support the zero rating (notably, it must keep the so-called French customs declaration (ECS document and formerly SAD)).


Services


If a business supplies services to a VAT-able business (B2B services) customer in another EU Member State or outside the EU it can zero rate your supply provided the service falls under the general principle laid down by Article 44 of Directive 2006/112/EC (i.e., the service is taxable in the country where the recipient is established). The reverse-charge mechanism should be applied on these services in the EU country of the recipient.


In respect of services supplied to non-taxable persons (B2C services) the general place of supply rule remains unchanged (i.e., the services would be taxable in the place where the supplier is established). Therefore, it must charge French VAT if it is established in France and it supplies the service from this French establishment.


Some exceptions (B2B and B2C) continue to exist such as services related to immovable property, passengers’ transportation services, restaurant, and short-term lease of means of transport.


Other specific exceptions exist for B2C supplies, only such as:


  • intra-Community transport of goods, works on movable goods, intermediary services
  • If it supplies services to a private customer (C) outside of the EU then it can zero-rate your supply in France provided the service falls within one of the following categories:
    • transfers and assignments of copyrights, patents, licenses, trademarks and similar rights
    • advertising services
    • services of consultants, engineers, consultancy bureaus, lawyers, accountants, and other similar services
    • data processing and the supplying of information
    • obligations to refrain from pursuing or exercising, in whole or in part, a business activity or a right referred to above 
    • banking, financial, and insurance transactions including reinsurance, with the exception of the hire safes
    • the supply of staff
    • the hiring out of movable tangible property with the exception of all forms of means of transport
    • telecommunications
    • radio and television broadcasting services
    • electronically supplied services (limited list provided for Article 98 C Annex III of the FTC)
    • provision of access to network and of transport or transmission through natural gas/electricity distribution systems and the provision of other directly linked services

How are goods dealt with on importation?


When goods are imported into France from outside the EU, import VAT and customs duty may be due. This must paid or secured before the goods will be released from customs' control. This import VAT and duty can be paid on the company’s behalf by a freight agent. However, if it is VAT registered in France and intends to resell the goods outside of France, it might apply for a VAT deferment account (specific regime of Article 275 of the French Tax Code).


Foreign entities non-established in France performing imports of goods in France followed by a domestic sale to a French VAT registered client liable for VAT in application of the reverse-charge mechanism do not need to be VAT registered for the purposes of paying the VAT at import. As from 1 July 2009, such entities should have an EORI number in application of the 312/2009 settlement of the European Commission. However, non-EU companies must appoint a VAT representative.


How are services which are brought into France from abroad treated for VAT purposes?


VAT territoriality: when are services taxable in France?


  • B2B


    Services carried out for the benefit of taxable persons established in France (B2B services), are generally deemed to be supplied in France where the recipient is established in France (Article 44 of Directive 2006/112/EC). Some exceptions continue to exist such as services on immovable property, passengers’ transportation services, restaurant, and lease of means of transport, entrance fee to fair trade, exhibition.

  • B2C


    Under the general principle, services rendered to consumers are taxable at the place of establishment of the supplier (Article 45 of Directive 2006/112/EC). However, the same exceptions apply as for B to B relationships: such as services on immovable property, passengers’ transportation services, restaurant, and lease of means of transport.

  • Other exceptions also exist for B2C supplies only, e.g., intra-EU transport of goods, works on immovable property, agency, certain services supplied to non-EU customers.


Use and enjoyment provision - case 1: services used or enjoyed outside the EU:


  • Certain services related to transportation of goods supplied to businesses established in France (B2B) but used or enjoyed outside the EU (i.e., performed outside the EU) may not be subject to French VAT (e.g.: transport of good outside of the EU).
  • All the same, certain services (e.g., repair, transformation, adaptation or works on goods) may not be subject to French VAT where they have been carried out on goods which have been subject to VAT upon importation (because included in the customs value declared for import VAT purposes).

Use and enjoyment provision - case 2: services used or enjoyed in France:


Some services (e.g., advertizing services, services of consultants, engineers, consultants, lawyers, accountants, and other similar services, short-term rental of means of transport ) supplied to a non business (C) established (or domiciled) in France or in the EU by a supplier established (or domiciled) outside the EU are subject to French VAT if used or enjoyed in France.


Who has to account for VAT?


In principle, the supplier should account for VAT.


However, in B2B relationships, the recipient should account for French VAT when it is VAT-registered in France and the foreign supplier is (1) not established in France (2) or if established, the French permanent establishment of the foreign supplier is not participating to the transaction (new rule from 1 January 2010). Reverse charge is not applicable where a supply is provided by the foreign permanent establishment of a French company (i.e., force of attraction of the French head-office).


Therefore, in particular, the following transactions taxable in France will be covered by the reverse charge mechanism:


  • supply of services taxable in France according to the general principle of taxation (place of the recipient under Article 44 of Directive 2006/112/EC)
  • domestic sales of goods
  • supply of goods which are subject to assembly or installation in France
  • supply of services related to real estate located in France such as services rendered by real-estate agent, architect, expert, etc. However, these services do not include the rental of real estate and the operations that lead to the delivery of a real estate property (building, rental with building obligation, etc.) which remain subject to the prior regime
  • cultural, artistic, sporting, scientific, educational, entertainment, or similar activities, including the activities of the organizers of such activities and where appropriate, supply of ancillary services.

A French recipient who does not comply with the reverse charge requirement incurs a 5 percent penalty of the VAT deductible.


If the recipient is able to recover all of the VAT, the reverse charge has no cost effect and is a VAT compliance matter only. However, if the company is partly exempt there is likely to be a VAT cost depending on the level of recovery allowed under its partial exemption method.

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Invoices

Is a business required to issue tax invoices?


The invoices to be issued by a business operator must comply with the French tax and commercial requirements.


What do businesses have to show on a tax invoice? 


Tax invoice should contain the following data:


  • date of issue
  • a sequential invoice number: If the invoice adjusts an earlier invoice (such as a credit note), unambiguous reference should be made to the original invoice, that is, date and number: Invoice numbers need to be applied in sequence on a chronological basis
  • supplier’s VAT number
  • in connection with intra-EU, deliveries, and transfers of goods, invoices must indicate the seller's and the purchaser's respective VAT registration numbers (Article 262ter I of the FTC)
  • in connection with intra-Community services where the recipient is accounting for VAT under the reverse-charge mechanism (Articles 196 and 194 of Directive 2006/112/EC), invoices must indicate both the seller's and the purchaser's respective VAT registration numbers.
  • supplier name and address
  • customer name and address
  • the quantity and nature of the goods/services supplied
  • the date on which the delivery of goods or supply of services is performed or, whenever such a date is different from the issuance date of the invoice, the date on which the discount is paid
  • the taxable amount per rate
  • unit price (exclusive of any VAT)
  • rate of any discounts (if not included in the unit price and if applicable)
  • the VAT rate applicable
  • the amount of VAT payable in Euros, per rate
  • the total amount including VAT (legal requirement)
  • total amount of VAT
  • new means of transport/margin schemes (if applicable): with respect to deliveries of new means of transport to another Member State, an invoice must be issued which describes the characteristics of the means of transport in question (Article 298sexies II and III of the FTC)
  • where the operator liable for VAT is a VAT-taxable person established outside the EU, its French VAT registration number and its VAT representative's VAT registration number, as well as the latter's full name and address
  • in the event of a VAT exemption or non-taxation or when the client is liable for VAT (that is under the reverse-charge mechanism) or when the VAT-taxable person benefits from the profit margin regime, the reference to the relevant provisions of the FTC, of the Directive 2006/112/EC or any provision indicating that the transaction benefits from a VAT exemption, a reverse-charge mechanism or profit margin regime
  • since 1 September 2006, in the framework of the specific tolerance procedure, the name of the répondant (that is, sort of a tax representative).

Further national requirements:


  • local language requirements: Invoices may be drafted in English for international transactions. French language is required for domestic transactions
  • exempt and zero-rated supplies (are invoices required): The French tax authorities have not taken up the option to release taxable persons from the obligation to issue an invoice for exempt supplies pursuant to Article 131 to 137, Article 110, Article 371 of the Directive 2006/112/EC (previously Article 13, Article 28 (2) a, Article 28 (3) b of the 6th Directive)
  • the seller's or supplier's legal status and amount of share capital (legal requirement)
  • the supplier's registration number with the Companies and Commercial Registry and the name of French town where the supplier is registered with the said registry (legal requirement)
  • the date on which the payment must be made (legal requirement)
  • the total price excluding VAT (legal requirement), the amount of the corresponding VAT detailed individually according to the different VAT rates applicable if any and the total price including VAT (legal requirement)
  • the applicable late-payment penalties.

Can businesses issue invoices electronically?


Yes, under specific condition, companies could use Electronic Data Interchange (EDI) or an advanced digital signature system. The authenticity of the origin and the integrity of the e-invoice must be guaranteed.  The e-invoice should also comply with other specific requirements provided by the French Tax Code.


Is it possible to operate self-billing?


Yes. French law specifically provides for the regime of self-billing (and even the outsourcing of the invoicing to a third party), regardless of whether or not the transactions are domestic or cross-border. This regime is subject to certain conditions (such as, conclusion of a power of attorney between the supplier and the client including some specific wordings) and the supplier remains entirely responsible as regards invoicing rules and French VAT consequences vis-à-vis the tax authorities.


Can a business issue VAT invoices denominated in a foreign currency?


Yes, the invoice could be issued in any foreign currency, but the amount of the total VAT to be paid should be quoted in euro.

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Transfers of business

Is there a relief from VAT for the sale of a business as a going concern?


There is no relief applicable strictly speaking but a compulsory VAT suspensive regime is applicable.

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Options to tax

Are there any options to tax transactions?


Certain economic activities which are exempt of VAT can, upon election of the taxpayer, be subject to VAT. Such an election may be advantageous for a taxpayer that incurs substantial business and capital expenses since he/she could recover a VAT credit equal to the amount of VAT he/she pays on the goods or services he/she uses in his/her business; moreover, where such an election is made, the taxpayer is exempt from payroll tax if 90 percent of its turnover is VAT taxable. A drawback to such an election, however, is the consequent increase in the price charged by the taxpayer, which is detrimental to purchasers not entitled to claim a VAT refund. The main categories are mentioned below (not exhaustive):


  • leasing of unfurnished buildings or non-developed lands
  • leasing of agricultural assets
  • certain transactions involving local public authorities connected to water, sanitation, and trade fairs
  • certain transactions involving banks establishments.

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Head office and branch transactions

How are transactions between head office and branch treated?


Transfers of Own Goods


The cross-border transfers of goods between a head-office and a branch are deemed to be intra-EU acquisitions/deliveries of goods if transferred from an EU Member State to France or from France to an EU Member State, or importations/exportations of goods if transferred from a non-EU Member State to France or from France to a non-EU Member State.


Supply of Services


According to the French tax authorities, supply of services between a head-office and a branch are disregarded for VAT purposes, that is, outside the scope of VAT since carried out within a same legal entity (this position is more restrictive than the European Court of Justice’s one).

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Bad debt

Am I able to claim relief for bad debts?


Yes, provided that the supplier is able to prove (by any means) that his/her debt is really irrecoverable. In practice, a debt is deemed irrecoverable when the supplier has taken all the proceedings against the debtor without success and has recorded the debt as a definitive loss.


When the debtor is into receivership (in practice this one of the very few cases acknowledged by the tax administration), the VAT may be recovered on the day of the judgment of liquidation or on the day of the judgment granting a recovery plan. Some formal conditions must also be met (such as, sending of a duplicate of the initial invoice with specific information).


Please note that for services, the tax point is the date of payment. Consequently, except when the taxpayer opts to pay VAT on invoice dates (option pour les debits), there should not be any bad debt relief for such provision of services.

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Anti-avoidance

Is there a general anti-avoidance provision under French VAT law? 


As a general rule, a company is free to organize its business methods the way it deems appropriate. However, the French tax authorities are empowered to disregard artificial and/or fictitious dealings whose sole purpose is to evade the tax or lower the tax liability which would have otherwise ensued (Article L 64 of the French Tax Procedure Code).


The French position seems to have been confirmed at a European level with the ECJ decision in the Halifax case (ECJ dated 21 February 2006 case C-255/02, C-419/02, C-223/03).


In order to limit VAT carousel frauds, the French tax code (Amended 2006 Finance Act, applicable in France from 1 January 2007 for goods and Finance Act for 2010 since 1 January 2010 for services), provides three new rules in case of fraud:


  • challenging the exemption for intra-Community deliveries of goods
  • challenging the purchaser’s right to deduct VAT incurred on purchase of goods
  • joint liability for payments for supply of goods or services

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Penalty regime

What is the French penalty and interest regime like? What penalties can be imposed as a result of certain errors? 


Insufficiency of declaration, default or late filing of VAT returns, default of payment or no payment of the VAT , undisclosed activity, non-declaration of reverse charge, mislabeled invoices are subject to penalties representation a percentage of the the related VAT and interest for late payments. Legal and criminal penalties could also apply in case of missing/wrong invoices.

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Tax authorities

Tax audits


How often do tax audits take place?


In principle, the time limit for a fiscal year audit (as far as corporate income tax and VAT are concerned) expires at the end of the third calendar year following that for which the tax is due. Please note that in certain situations the time limit can be interrupted or suspended. French Tax law also provides for specific 10 years limitation period in case of undeclared activities.


From a practical standpoint, there is no particular rule as regards the frequency of tax audits.  It is based, as a general rule, on the nature of the activity carried out, the level of turnover, etc.


Are there audits done electronically in your country (e-audit)? If so, what system is in use?


From a general viewpoint, the French tax authorities tend to use e-audits when they proceed to specific computerized accounting tax audit. In this respect, they can use ACL.


Advance rulings and decisions from the tax authority


Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?


Yes.


Are rulings and decisions issued by the tax authorities publicly available in your country?


No.

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Miscellaneous

In your country, are there unique specific indirect tax rules (regimes) that differ from standard indirect tax rules in other jurisdictions?


Yes, for example any derogations granted under the European VAT Directive.


Are there indirect tax incentives available in your country (e.g. reduced rates, tax holidays)?


Yes (see 1st section for the reduced rates and exemptions).

 

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