Important rules about VAT in France
Updated on 15/05/2023
The general principles of VAT are identical in all countries of the European Economic Community. However, when you work or run a business in France, it is important to understand the main rules that apply here.
Below, we’ll explain some aspects of French tax law relating to:
- Taxable and exempt transactions
- The tax base and the main VAT rates
- French tax regimes
- VAT refunds
- Intra-Community VAT
- Obligatory VAT-specific information on invoices
If any of this is raising questions for you, contact us!
I – Taxable and exempt transactions
Transactions that are always subject to VAT:
- Constitute a supply of goods, a supply of services or intra-Community purchases
- Are carried out by persons subject to VAT
- Constitute independent, ordinary economic activity
Transactions that must fall within the scope of VAT are divided into three main categories:
- Delivery of goods: the most common operation that generates a delivery with transfer of ownership is a sale. However, the delivery of tangible movable property may also result from the execution of an installment sale or hire-purchase contract or even a sale contract with retention of title clause.
- Services such as:
- Rental of tangible or intangible movable property (goodwill, patents) or real estate
- Custom work
- Transport of people and goods
- Building work
- Assignments or concessions of intangible movable property (rights, patents, trademarks, know-how, etc.)
- Studies, research, expertise
- Intermediary operations acting on behalf of third parties
- On-site sale of food or beverages
- Accommodation services
- Provision of services to oneself
- And more…
- Intra-community acquisitions
However, certain transactions which fall within the scope of VAT are exempt:
Unless said otherwise provided by law (exports for example), the exemption entails the loss of tax deduction rights, which encumbered the elements of the price of the transaction carried out.
The main cases for exemption are:
- Transactions exempt under a domestic regime, mainly:
- Exemptions used to avoid double taxation (transactions subject to registration fees, gambling taxes, etc.)
- Exemption of the sale of used goods by their users
- Exemptions relating to the exercise of medical and paramedical professions, education and ancillary operations
- Exemptions from which public utility organizations may benefit
- Exemptions from services rendered to their members by certain groups
- The exemption of certain real estate rentals
- Exemptions from banking activities
- Intra-Community trade
- Certain transactions, such as imports
- Exports, and transactions considered as exports
II – Tax base and the main VAT rates
Concerning the supply of goods, the provision of services and intra-Community acquisitions, the tax base is made up of all sums, securities, goods or services received or to be received by the supplier or the service provider in return for transactions by the buyer or a third party, including subsidies linked to the price of these operations.
The tax base must include:
- Taxes and duties, except for VAT itself
- Costs incidental to deliveries or services (commission, packaging costs, transport, insurance, etc.)
However, discounts and rebates must be deducted from the taxable price if these are contractually agreed by the supplier.
Main rates that apply in continental France
- 2,1% for medicines classed as reimbursable by French Social Security, press releases, the sale of live animals for slaughter to persons not subject to this tax, the first 140 performances by theatres and circuses
- 5,5% for essential products and operations with a social purpose: these include food, gas and electricity subscriptions, equipment and services for the elderly and the disabled, the supply of heat produced by renewable energies, social housing, the cost of energy efficiency improvements in homes, deliveries by artists or writers of works of art or books
- 10% for the following in general: passenger transport, accommodation, furnished rentals or classified campsites, certain renovation and maintenance work on housing, restaurant meals, non-refundable medicines, entrance fees to cinemas, fairgrounds, museums, zoos, cultural sites, exhibitions, etc.
- The 20% rate applies to products or transactions that are not subject to the 5.5 or 10% rates, i.e., this rate applies to all products or services that are not regulated by specific VAT rates.
III – French tax regimes
Companies whose annual turnover does not exceed certain thresholds are entitled to a VAT exemption. However, these businesses may opt for VAT.
The annual threshold amounts for the years 2023 to 2025 are as follows:
- Sales activities and provision of accommodation: € 91,900 for year N-1 or € 101,000 if turnover N-2 does not exceed € 91,900
- Service provision activities: € 36,800 in year N-1 or € 39,100 if turnover N-2 does not exceed € 36,800
The franchise regime has numerous consequences at company level, particularly as regards the non-recovery of VAT on investments. It is therefore extremely important to discuss this with an English-speaking accountant who may recommend that you opt for a VAT tax regime.
“Régime du réel simplifié”
This scheme applies to companies whose annual turnover ranges from € 91,900 to € 840,000 for sales activities and from € 36,800 to € 254,000 for service activities. These thresholds apply to the years 2023 to 2025.
Companies covered by this scheme must pay two instalments during the year, the first instalment in July of 55% of the VAT due for the previous year before the deduction of VAT on fixed assets, and the second in December of 40%. The taxpayer is exempt from advance payment if the amount of VAT due for the preceding financial year is less than € 1,000.
When the annual accounts are filed, the total amount of VAT due for the full year is calculated precisely, and the sum of the two instalments paid is deducted from the amount due.
“Régime du réel normal”
Companies whose turnover in the previous year exceeded € 840,000 for sales activities or € 254,000 for service providers are subject to this regime by law. In this case, the taxpayer must declare and pay VAT monthly.
IV – VAT refunds
When the amount of VAT to be deducted exceeds the amount of VAT collected, the business receives VAT credit. The company then has a tax claim against the French Treasury.
There are therefore two options available to the company:
- Carry forward the VAT credit to the following tax periods
- Request a refund of all or part of the VAT credit, on the condition that certain thresholds are met
VAT credit and refund options
Companies operating under the “real normal” regime, and which file monthly or quarterly VAT returns, can request a refund of their VAT credit if it exceeds € 760.
Companies with an annual VAT imposition under € 15,000, and which submit annual VAT returns, can request a VAT credit refund for a minimum amount of € 150.
Companies subject to the “real simplified” regime can file an annual VAT return in May, then pay their VAT every six months (in July and December). In this case, they can request a VAT refund if this reaches the minimum threshold of € 150.
They can request a VAT credit refund when paying one of the half-yearly VAT instalments, provided that the request is for at least € 760, and that the refundable VAT comes from the acquisition of goods that are fixed assets.
The formalities of requesting a reimbursement
Companies under the actual normal tax regime must have an intra-Community VAT number, then they can download and complete special form no. 3519-SD and attach it to VAT return form no. 3310.
Companies under the “real simplified” tax regime must request the refund of VAT credit when they file their annual VAT return on form 3517-SD.
V – Intra-community VAT
These involve deliveries of movable goods that are shipped or transported from France to another EEC member state. Such deliveries are exempt under four conditions:
- 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 EEC
- The purchaser is subject to VAT
An intra-Community purchase is a purchase of a movable asset shipped or carried by the vendor or the purchaser, or by a third party on their behalf, from an EEC member state to the buyer in France. Under these conditions, VAT is paid by the purchaser who must declare the amount on their VAT return (form CA3), and immediately recover the same amount of VAT on the same declaration, unless of course the VAT on the asset purchased is not recoverable.
General principles for the taxation of services
This article only explains the general principles, but it is important to note that there are many exceptions.
Services provided in France to anyone subject to VAT in France (Business to Business) are taxable in France. The beneficiary of the service, established in France, must self-liquidate its VAT. The method for self-liquidation is the same as for intra-Community purchases.
Services provided to persons not subject to tax
VAT can only be imposed in France if the provider is established in France, has a French office or is domiciled in France (except for distance sales).
For more detailed information, please consult these articles on our website:
VI – Obligatory VAT-specific information on invoices
The main information that must be stated on invoices is listed below. Please note that this list includes the most common information but is not exhaustive.
- Client’s name and address
- Invoice date
- VAT ID number of the seller/service provider and the customer for intra-Community supplies or services
- Invoice number
- Client SIREN or SIRET number
- Delivery address
- Identification of invoiced transactions (sale of goods, services or mixed transactions)
- Detailed information on all goods delivered, or services rendered (quantity, denomination, unit price)
- Discounts or rebates
- Date of delivery of goods or provision of services if different from the invoice date (or the payment date of a deposit)
- Total amount excluding tax and amount of tax payable at that tax rate
- Possibly, payment option for VAT on debits
- In the case of exemptions, references from the legal text which provides for this exemption (TVA non applicable article 293 B du CGI)
- The words “auto-liquidation” when the purchaser or customer is subject to VAT
Some other particularities which must be entered in the following special cases:
- The company provides intra-Community services: regardless of the type of service rendered, the VAT for an intra-Community service is in principle due by the purchaser, who will self-liquidate it. It is therefore not subject to French VAT.
In this case, the invoice must include the words “auto-liquidation”.
- The company performs a service or a delivery outside the EU: the performance, by a company established in France, of a service or a delivery of goods for the benefit of a company established outside the European Union is not subject to French VAT.
The invoice must include the statement: “TVA non applicable – art. 259-1 du CGI”.
- The company makes an intra-community delivery of goods: when a French company makes sales to a company located in another country of the European Union, it makes an intra-community delivery.
The invoice must include the statement: “Exonération de TVA: article 262 ter I of CGI”.
- The company benefits from the VAT regime on the margin: this regime consists, for a company buying and reselling second-hand goods, in collecting VAT only on the margin that it realizes on its purchase-resale operation.
The invoice must include the following information: “Application of VAT on margin article 297 A du CGI and directive communautaire 2006/112/EC”.
The VAT remains a vast subject; within this article, the main general rules have been set, however, many other specific cases still remain unspoken. Do not hesitate to contact one of our English-speaking accountant to get further detailed information on this topic.
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