IMPORTANT RULES ABOUT VAT IN FRANCE

VAT IN FRANCE

What is subject to VAT in France?

You are liable for VAT in France if your business meets the following criteria:

  •  supplying goods/services or importing goods
  • the person supplying the goods/services or importing the goods is liable to VAT
  • the good/services must be considered an independent and usual financial activity
     

What is the French VAT Rate?

 

There are several different rates of VAT based on the goods or services that are being provided, as defined in the table below.

VAT Rate

Goods or Services

2.1%

  • medicines reimbursable by social security
  • newspapers/magazines

  • sale of live animals for slaughter

  • first 140 performances of theatres or circuses

5.5% *

This VAT rate is applied to goods or services considered essential or in the best interests of society, including:

  • food
  • gas

  • electricity

  • equipment and services for the elderly and the disabled

  • energy quality operations
  • social housing

  • books
  • works of art
  • cinema tickets
  • sporting event tickets

10% *

  • restaurants
  • fast-food outlets
  • social housing construction
  • household work
  • farming industry
  • forestry industry
  • television services
  • passenger transport
  • camping pitches rental

20%

All other businesses

* These lists show a selection of the goods and service that are eligible for a reduced rate of VAT but should not be considered a comprehensive list.

 

The French Tax Bands

 

There are three VAT bands in France, depending on your business’ annual turnover.

 

Franchise or The Exempt Band

Companies whose annual turnover does not exceed €82,800* for sales or €33,100* for service providers are exempt from paying VAT. However, they may opt to pay VAT anyway.

If the business owner opts not to pay VAT, then they aren’t able to claim VAT back on investments that they make for the business.  For example, if a café owner opts out of paying VAT, they won’t be able to claim VAT on a new oven for their restaurant as a business expense.

It is therefore extremely important to discuss your options with an English-speaking accountant.

 

Régime du réel simplifié or The Simple Band

This band comprises of businesses whose annual turnover is between €82,800* and €788,000* for sale of goods or between €33,100* and €238,000* for service providers.

These companies will make two tax payments in each financial year:

  • July: Payment of 55% of the VAT due from previous financial year (before deducting VAT on fixed assets)

  • December: Payment of 40%

If the amount of VAT due for the previous financial year in less than €1,000*, the owner would be exempted from an advance payment.

When you file your taxes each year, the VAT for the whole financial year is calculated and the two payments are deducted from the total amount due.

 

Régime du réel normal: The Normal Band

This relates to companies whose turnover exceeds €788,000* for goods sold or €238,000* for services rendered.

Businesses in this band must pay their VAT on a monthly basis.

* Amounts correct as of 2017

 

 

Intra-Community VAT

 

This relates to VAT on goods/services within the European Economic Community (E.E.C.).

 

Intra-Community Deliveries

This is the delivery of movable goods which are shipped or transported from France to another member state of the E.E.C.

These deliveries are exempt from VAT under four circumstances:

  • Delivery is made against payment

  • The seller is subject to VAT in France

  • The goods are shipped outside France to a member state of the E.E.C.

  • The purchaser is subject to VAT

 

Intra-Community Acquisitions

This is the acquisition of a movable property shipped or transported by the vendor/purchaser or by a third party on behalf of vendor/purchaser, from a member state of the E.E.C. to the acquirer in France.

The purchaser pays the VAT. They must declare this on their VAT return (CA3 form) in order to recover the VAT paid, except in circumstances where the VAT on the property acquired is not recoverable.

 

General Principle for the Taxation of Services

 

Services provided in France to persons who are responsible for paying VAT in France (i.e. Business to Business) are taxable under French law.

The person who is provided with services must pay the VAT. The method for this is identical to that described above in the section about intra-community acquisitions.

Services provided in France to persons who are not responsible for paying VAT in France (i.e. Business to Business) are not taxable in France unless the service provider is (fully or partly) based in France.

There are many exceptions to this general rule. Please discuss with an accountant how your business may be exempt from certain taxes.

 

Information Required on Invoices

 

  • Name and address of client

  • Date of invoice

  • VAT Identification Number of the seller/service provider

  • VAT Identification Number of the customer for Intra-Community supplies or services

  • Bill number

  • Detailed information for each delivered good or service rendered (quantity, denomination, unit price, etc)

  • Discounts or rebates

  • Total amount, excluding taxes and amount of tax payable by tax rate

  • In case of tax exemption, you must reference the legal text which provides this exemption

  • The words "auto liquidation" when the purchaser or customer is liable for VAT.

This is a list of some of the most common information that is required to appear on invoices in France; however, it should not be considered exhaustive.

 

This page contains a very simplistic interpretation of the French VAT system but, as with any legal system, there is a great deal of complexity based on individual circumstances.

For more detailed information or help with a specific issue, please contact an English-speaking accountant.