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Everything You Need to Know About French VAT

December 5, 2022

France introduced the Value-Added Tax, or Taxe sur la Valeur Ajoutée, in 1954. (TVA). It was extended to incorporate the full economy in 1968. (generalization of VAT).

France was the first nation to apply VAT, followed subsequently by Germany and other EU member states. In a number of ways, the EU's VAT laws are unified.

Generally speaking, French VAT may be deducted if it is incurred for business reasons and all criteria are met.

Under some circumstances, it is permissible to deduct VAT prior to the start of an economic activity. The expenditures should be related to the anticipated business, and a compliant invoice must be produced for these charges.

The French VAT laws are based on EU legislation since France is a founding member of the EU. Currently, the standard French VAT rate is 20%. As a member of the European Union, France is required to adopt the VAT Directives, which establish VAT guidelines.

To a large extent, the French Tax Code governs French VAT legislation (CGI). The Direction Generale des Douanes et Droits Indirects also oversees the management of other declarations.

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When Do You Need to Register for VAT?

Foreign Entities

Any foreign company that makes a taxable supply in France must, by law, register for VAT inside the country during the first month of doing business there, even if the company is not formally incorporated there. In France, there is no VAT registration threshold for foreign companies. Any business that engages in taxable activities but lacks a physical presence in the EU must register for VAT. 

Common examples of such activities are listed below: 

  • A supplier must be registered for VAT in order to make a supply of goods situated in France to a French client where the supply is not subject to reverse charging.

  • To avoid penalties, foreign companies that do not have a permanent presence in France but provide services subject to French VAT must register for VAT.

  • Goods must be assigned a VAT number before being sent to any country outside of the European Union for export.

  • Importing into France needs a VAT number so that the VAT may be calculated on the spot. It's required in France to pay VAT on imported goods that have been delayed.

  • Acquiring products from another Member State when all prerequisites for intra-community movements are satisfied requires the client to become VAT registered. 

Transactions that are normally subject to French VAT include: 

  • supply of goods or services rendered for compensation by a taxable person acting as such.

  • Intra-Community purchases.

  • Imports. 

Taxable supplies are basically the shipment of products or the performance of services that result in an economic activity in return for a valuable consideration and are made by those subject to VAT, and the transaction is not exempt from tax. 

In France, there is no option for a voluntarily VAT registration. That is, businesses must have engaged in a taxable transaction before they may register. 

It takes around 4-12 weeks to be registered for French VAT; however, this time frame is flexible and determined by the tax office.

Do You Need a Fiscal Representative in France?

The short answer is yes, especially when it comes to non-EU entities with no physical presence in France. However, EU and non-EU enterprises that have signed an administrative assistance agreement with France are exempt from appointing a tax agent in France. They may handle VAT registration and tax returns.

However, owing to the complicated tax requirements, it is helpful to employ a VAT expert as a tax agent to handle VAT registration, tax, and Intrastat reporting.

Non-EU enterprises that have not signed an administrative assistance agreement with France must designate a tax representative in France who is fully and severally responsible for VAT and tax penalties. 

The need for appointing a fiscal representative for VAT purposes in France was eliminated for British firms after Brexit in 2021.

A fiscal representative is not required either for businesses based in countries with whom France has a mutual aid treaty.

 

For VAT reasons, EU companies must register independently. This implies that the company's legal representative, rather than a French resident, signs the registration form. Directly registered French companies may delegate the responsibility of fulfilling their VAT responsibilities to an agent. The so-called "mandataire fiscal" is not personally responsible for the company's tax debts.

What are the French VAT rates?

In France, the general VAT rate is 20%. The reduced rates are 5.5% and 10%, but there are also some other specific rates, for example, 2.1% for items from chemists or newspapers or 13% for goods sold in Corsica.

When Should I File VAT Returns?

In France, VAT returns are generally submitted monthly.  In some instances, quarterly or yearly VAT filings may be permitted. Small firms have the option of submitting returns annually; nevertheless, the scheme's stringent criteria make it exceptional for foreign companies.

In addition, the following circumstances determine whether regular or simplified regimes apply:

  • Simplified Regime

Companies with a turnover of between €85,800 and €818,000 in supplies of accommodation and trading activity and between €34,400 and €247,000 in supplies of services and liberal professions, and a total output VAT in the previous year below €15,000, qualify for the simplified regime (régime du réel simplifié).

  • Normal Regime

Companies having a revenue of more than €818,000 for accommodation and trade activities and more than €247,000 for services, and those whose VAT payable the previous year did exceed €15,000, are considered to be in the normal regime, or régime du réel normal.

Under the regular reporting schedule, the following time frames are used:

  • Frequency of filing VAT returns

  • Standard reporting per month as per industry standards

  • Quarterly, if for the prior four quarters, the total amount of VAT owed did not surpass €4,000. 

  • Annually, when allowed for exceptional circumstances like change of management

French VAT returns must be filed and paid between the 15th and 24th of the month after the reporting period. The specific date is determined by the relevant tax agency, which is based on the location of the business or fiscal representative.

Foreign enterprises without a permanent establishment are required to submit their VAT reports by the 19th day of the month following the reporting period. If the due date falls on a weekend or a holiday, it is moved to the next business day.

A due date will be assigned to established enterprises or non-EU businesses registered through fiscal representatives based on their legal structure and the first letter of their company name.

In France, you must use a direct debit payment system to pay your VAT. Businesses, including those without a physical presence in France, must use this system (known as "telepaiements") to remit VAT payments. It is necessary to have a bank account in France or another SEPA country (other than the UK) to proceed.

The taxpayer must register for an account with the tax authorities' website in order to set up the direct debit. The bank account information may be entered once the account has been established and activated. The last step is to get a direct debit mandate, have the authorized signatory complete it, and then submit it to your bank.

Direct debit eliminates the need to provide the bank with a reference, period, or any other information in order to process payments. The system will automatically direct the VAT payment and attach it to the filed return.

It is possible to pay French VAT by bank transfer in certain circumstances.

How to Register for French VAT

Contact us for a no-cost consultation if you need assistance registering for French VAT or if you're not sure whether you need to register.

Before we begin the registration procedure, it is crucial that you collect the necessary paperwork:

For EU companies or companies established in any EU state:

  • Articles of incorporation or association (including a non-binding French translation) 

  • IMP form in two copies

  • EU VAT number

For businesses established in a non-EU state:

  • Certificate of incorporation

  • Articles of incorporation or association (including a non-binding French translation) 

  • Directors ID ( passport copy)

  • Company Bank Account Statement

  • Amazon.fr merchant code (for amazon sellers only)

 

EU-registered companies are required to register not later than one month from the start of taxable activities. Non-EU-registered companies have a time limit of two months. After registering in France, the corporation must disclose and pay VAT and follow French compliance law.


For further information, please contact us.

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