France VAT Guide

Introduction

Though a separate country, France commemorates the EU-wide VAT legislation enacted to harmonize the VAT principles of all EU Member States and remove conflicts. Thus, most French VAT rules align with EU VAT Directive 2006/112/EC.

Should you collect VAT in France?

You must collect VAT in France if you are doing any taxable transaction, which includes the following:

1. Supply of Goods: Supply of goods means transferring the right to dispose of a tangible property as owner.
2. Intra-EU acquisition: Acquiring or purchasing goods within France from another EU Member State as a VAT-registered person (typically known as the Reverse Charge Mechanism).
3. Supply of Services: Supply of services covers any transaction not covered in the supply of goods.
4. Import of Goods: Any transaction that imports goods from a non-EU state to an EU Member State.

Refer to Articles 256 & 257 of the French Tax Code for more details. Further, since the VAT laws of most EU Member States are harmonized with the overall EU VAT law (i.e., Directive 2006/112/EC), you can refer to Articles 14-30 of the EU tax directive for detailed information on taxable transactions.

When should you register for VAT in France?

The VAT is generally charged on a destination basis (owing to place of supply rules – discussed separately in the One Stop Shop article), which means every person (whether registered anywhere or not) making any taxable sales into France must register for VAT. Below is the concise list of transactions that would require a VAT registration in France:

• Supply of Goods or Services in France to non-taxable persons: Seller must register in France and pay VAT only if they have not opted for One Stop Shop (see Notes 1 and 2 below).
• Supply of Services in France to a taxable person: The recipient of services must register and pay VAT in the country if the supplier is not established in France (under Article 196 of the EU VAT Directive (pg.39)).
• B2B Acquisition of Goods: Where the goods are sold by a taxable person from any EU Country to a taxable person in France, the buyer should register for France VAT (reverse charge basis under Article 197 of EU VAT Directive (pg. 39)).
• Import of Goods in France: The importer must pay and register for VAT (if not covered in the Import One Stop Shop–see our OSS article for details).
• Export of Goods/ Services: Exporting goods/ services to non-EU countries would require a VAT number.

Important Note 1: When you supply goods to consumers (i.e., non-taxable persons) from other EU Member states to France, and your total annual sales (goods/ services) in the EU are more than EUR 10,000, then only the goods/ services will be taxed in France, and you would require France VAT registration; otherwise, they should be taxed in the supplier’s member state. This is based on the EU-wide VAT threshold specified for TBE services and distance sale of goods. Refer to our EU One Stop Shop Article for more details on the EU-wide VAT threshold and distance sale of goods.

Important Note 2: The cases where you have opted for EU One Stop Shop registration are no longer required to be registered separately for France VAT. These cases include the B2C sales made by taxable persons from other EU countries to France of over EUR 10,000 and the import of goods below EUR 150. Visit our EU One Stop Shop article for more details.

“Example 1: Company A, a Spain-based company, sells goods to a non-taxable buyer B in France. Company A’s total annual sales exceed EUR 10,000 in the EU, excluding sales in Spain.

Company A must either register for France VAT (if it does not opt to register for One Stop Shop) or the One Stop Shop.”

France VAT Threshold Summary

*Total annual turnover in the preceding calendar year didn’t exceed EUR 91,900 or EUR 101,000, whereas total annual turnover in the penultimate calendar year didn’t exceed EUR 91,900.

**Total annual turnover in the preceding calendar year didn’t exceed EUR 36,800 or EUR 39,100, whereas total annual turnover in the penultimate calendar year didn’t exceed EUR 36,800.

To read the official guidance, visit Article 293B of the France Tax Code.

How can you Register for VAT in France?

You must submit a VAT registration form either through an online portal or manually to your responsible tax office. It can take a couple of weeks. However, the online application is processed faster. The following details must accompany the VAT application:

• Name, address, and nature of business.
• Details of Offices/ facilities including branches, warehouse, etc.
• Bank Account details.
• If a Company is registered elsewhere (or in another EU Member State), the tax office and VAT number under which the Company is registered must be provided.
• Articles of Association.
• Certificate of Incorporation.
• VAT Certificate.

For application forms and additional information about registration in France, kindly visit the official website of the France Tax Authority. The registration process can sometimes become cumbersome, so you can use TaxDo’s streamlined software, and you do not have to go anywhere else. Just fill out the required information on our software, and we will do the rest.

How should you collect and calculate VAT in France?

VAT is applied to all taxable transactions (described earlier in this article) except those otherwise exempt. VAT is generally charged on a destination-based principle (see the place of supply rules described in the OSS Article); thus, the VAT Rate is applied to any sales made to France.

VAT Rates

You must charge the VAT Rate of 20%, other than the products/ services you are supplying that are covered under the reduced rates of 10%, 5.5%, and 2.1%. Below is an illustrative list of items covered under the reduced VAT Rates:

To learn the complete list of reduced-rate goods/ services, read Articles 278-282 of the France Tax Code. Alternatively, the France VAT rates are available on the EU Commission website.

Certain conditions may apply to the reduced rates, which is where things get trickier. TaxDo is here for you! Our experts are well-equipped with VAT laws and will resolve all your concerns.

Below is the simple formula you can use to calculate your VAT collection on each merchandise/ service sold:

VAT collectible = Sale value * (Standard Rate or reduced Rate as may be applicable)

Digital Products/ Services

Digital Products are those stored, used, or delivered in electronic format or any such form. EU VAT applies to all such kinds of digital products, and thus, France VAT must also be applied to digital products since the French VAT laws align with EU VAT rules.

The digital products include the following:

• E-books, images, newspapers, movies, periodicals, videos, etc.
• Software-as-a-Service (SaaS), Platform-as-a-Services (PaaS) or Infrastructure-as-a-Service (IaaS).
• Online ads and affiliate marketing.
• Websites, site hosting services, and internet service providers.

Few of the listed above are covered under a reduced VAT Rate. For instance, books provided in download or audio format are taxed at 5.5%. For more information on reduced rates, refer to the previous section of this article.

VAT Exemptions

The legislation provides certain exemptions from the VAT under Articles 261 to 263 of the France Tax Code, such as:

• Export deliveries.
• Futures transactions on goods are carried out in a regulated market, excluding those that lead to the cessation of the sector.
• Operations are carried out by fishermen and fishing vessel owners.
• Supply of goods to an entrepreneur for his business (B2B).
• Rental of land and building for agricultural use.

See what exemptions are covered.

B2B and Reverse Charge Mechanism in France?

When a taxable person from another EU Member State sells the goods/ services to a VAT-registered person in France, the transaction is considered a B2B Intra-Community supply, and the seller is not required to charge the VAT on an invoice raised to the buyer. Instead, the French buyer will account for VAT on the intra-community acquisition (under the reverse charge mechanism). In the VAT return, the buyer will calculate the input VAT on purchase from another state and show the output VAT for the same amount, allowing him to adjust the tax liability, resulting in a zero VAT payment. Reverse charge is applied under Articles 196 & 197 of the EU VAT Directive.

The same principle will apply when a taxable person from another EU Member State maintains a warehouse in France and transfers his goods. The seller will need a VAT number in France and should account for VAT as an Intra-Community acquisition under the reverse charge. He will show deemed purchase (input VAT) and deemed sale (output VAT) while filing the return in France, leading to zero tax being paid.

“Example 2: Company A in Germany sells goods in Europe. For this purpose, it has set up a warehouse in France. From Germany, it transfers the goods to the France Warehouse and sells them in France.

Company A must register and account for France VAT on the stock transfer (considered an Intra-community B2B acquisition). While filing the VAT return in France, Company A will show input VAT on intra-community acquisition and report the output VAT for the same amount. This way, the VAT liability would become zero on the stock transfer. Later, Company A must charge and pay France VAT for goods sold to the consumers in France.”

Should you appoint a fiscal representative in France?

A taxable person who doesn’t have an establishment, registered office, or branch office in the EU and carries out any VAT-exempted or taxable transaction in the country must appoint a fiscal representative, however optional for businesses based in another EU Member State.

The appointed fiscal representative shall require a power of attorney from the taxable person registered in another EU Member State.  

Appointing a fiscal representative and carrying out the transaction may be difficult, as any defaults will lead to heavy fines and penalties. TaxDo can help you by appointing a fiscal representative and handling all the duties, as we work with leading tax partners in Europe, so we can find it easily.

To know more about the duties and responsibilities of a fiscal representative, read Article 289A of the French Tax Code.

How should you file VAT in France?

France has two VAT regimes: Normal and Simplified. The VAT declaration frequency for both regimes is as follows:

For more information, refer to Article 287 of France’s Tax Code.

Depending on your filing frequency, you must file your VAT return in France by the 19^th of the month following the reporting period. Filing dates are sometimes extended in special circumstances through a notification by French tax authority.

Note: If your tax due date is a holiday or weekend, the next business day would be considered the final due date. The official website, where you can see what the legislation says about VAT filing due dates.

You can file the VAT return in France through the online portal or using TaxDo’s specialized software, which seamlessly files, calculates, and reports your taxes. Additionally, if you are selling to other EU Member States and opted for One-Stop-Shop, you must file an OSS return. Refer to our OSS article for further details.

Are there any fines or penalties for default when filing or paying VAT?

The legislation levies a penalty of up to 10% of VAT due if the return is filed within 30 days of the first reminder, which will increase up to 40% after 30 days. (Interest is charged at 0.2% per month, additionally).

Similarly, if you pay after the due date, the penalty is 5% per month of the tax due. Additionally, an extended interest Rate of 0.2% per month is applied.

However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates. Please review the guidelines France issued for penalties and interest under Articles 1728, 1729, and 1731 of the French Tax Code.

VAT Invoice in France

A VAT invoice is a testament to how much VAT is charged and collected and evidence of the B2B/B2C supply basis for applying the other rules. Accordingly, the France VAT invoice must include the following information:

• Business Name and Address of buyer and seller.
• Business VAT number issued to the supplier.
• Date of issue.
• Quantity and type (customary trade name) of the goods supplied or the scope and nature of the other service.
• Time of delivery or other service.
• The applicable VAT rate and the amount of tax are attributable to the consideration.

For more details, refer to Article 289 of France’s Tax Code.

Important Note 3: You must convert the amounts to your official currency for any sales made to a country outside France. For this purpose, you can use the European Central Bank’s official exchange Rates.

Keeping Records: You must keep the VAT records for at least ten years under Article 369 of the EU VAT Directive.

Zero VAT territory in France – The likes ofGuadeloupe, Guyana, Mayotte, Martinique, or Réunion etc. do not come under the purview of EU VAT rules. Any products/ services received from these territories are considered an Import from outside the EU; whereas any sale to these territories is treated as Exports, leading to zero VAT. TaxDo we will guide you in the best possible manner as our experts has immense experience and knowledge in handling such territories. Refer to Articles 294-298 of the France Tax Code for details on these territories. Below is the tax structure of different regions: