VAT, GST and Sales Tax in France

Summary

Name of the tax Value-added tax (VAT)
Local name Taxe sur la valeur ajoutée (TVA)
Date introduced 10-Apr-54
Trading bloc membership European Union (EU) Member State
Administered by French Ministry of Finance (http://www.impots.gouv.fr)
VAT rates
Standard 20%
Reduced 2.1%, 5.5%, 10%
Other Exempt and exempt with credit
VAT number format FR 31 8 3 2 3 7 5 8 3 1
VAT return periods Monthly (normal regime); quarterly and annually (simplified regime); or no return, depending on turnover and output VAT due the previous year
Thresholds
Registration None
Distance selling EUR35,000
Intra-Community acquisitions EUR10,000 (under specific conditions)
Recovery of VAT by non-established businesses Yes

Scope of the tax

VAT applies to the following transactions:

  • The supply of goods or services performed in France by a tax­able person
  • The intra-Community acquisition of goods from another EU Member State by a taxable person or, under certain circum­stances, by a nontaxable legal person (see the chapter on the EU)
  • The intra-Community acquisition of new means of transport from another EU Member State by any person
  • Reverse-charge services received by a taxable person in France (that is, services for which the recipient must account for the VAT due)
  • The importation of goods from outside the EU, regardless of the status of the importer

For VAT purposes, the territory of France includes Corsica and Monaco. The Overseas Dependencies of Guadeloupe, Martinique and Réunion are considered to be non-EU countries with respect to the other EU Member States (see the chapter on the EU), although French VAT is applicable in these territories (with specificities). VAT does not apply in French Guiana (Guyane) and Mayotte.

Who is liable

A taxable person is any business entity or individual that performs taxable supplies of goods or services, intra-Community acquisi­tions or distance sales, in France in the course of a business.

Under the franchise regime, the following thresholds, effective through 31 December 2017, apply to small French-established businesses:

  • Sales of goods: EUR82,200 during the previous year (or EUR90,300 when the turnover did not exceed the EUR82,200 threshold during the year before the previous year)
  • Supplies of services: EUR32,900 during the previous year (or EUR34,900 when the turnover did not exceed the EUR32,900 threshold during the year before the previous year)

A taxable person that begins business activity in France must notify the French VAT authorities and register for VAT within 15 days.

Special rules apply to foreign or “non-established” businesses.

Group registration. An election to create a VAT payment group is allowed, with the election coming into effect at the beginning of the following financial year. The VAT payment group is consid­ered to be a single entity exclusively with respect to a consoli­dated VAT payment (or refund), hence it is not a VAT group as described in article 11 of EU Directive 2006/112/EC. As a result, all VAT liabilities due and input VAT (VAT credit) held by the group members are compensated within the group. However, each member of the VAT group must submit its own VAT return for information purposes. Intra-group transactions are thus still subject to French VAT.

Non-established businesses. A “non-established business” is a business that has no fixed establishment for VAT purposes in the territory of France. If a non-established taxable person exclu­sively performs supplies that are subject to the reverse-charge mechanism, it does not need to register for VAT in France.

Otherwise, a non-established businesses should review their French VAT registration status. In addition, a French VAT regis­tration may be necessary to fulfill Intrastat obligations (see Section K).

Tax representatives and agents. Businesses established outside the EU in countries not having signed a convention regarding mutual assistance in tax matters with France (except some listed countries) must appoint a tax representative to register for VAT. The tax representative must be known and accepted by the French tax authorities and is jointly and severally liable with the non-established businesses represented by it for all French VAT liabilities.

Foreign businesses established within the EU or in countries hav­ing signed a convention regarding mutual assistance in tax mat­ters with France (except some listed countries) may either register for VAT directly or appoint a VAT agent who files the registration form and the periodic VAT returns on behalf of the foreign company. In contrast to a VAT representative, the VAT agent acts under the responsibility of the foreign entity. The same rules apply to businesses established in countries that have con­cluded a tax treaty with France covering mutual assistance.

Reverse charge. Under a mandatory reverse-charge mechanism, the recipient of goods or services holding a French VAT number is liable to settle the French VAT incurred on the (local) supply of goods or services performed by a taxable person not established in France, regardless of where the recipient is established. An entity is considered VAT-established in France if it holds a suffi­cient degree of permanence and a suitable structure in terms of human (French resident employees) and technical resources (e.g., leased cars) in France enabling it to receive the supply of goods or services in France.

Effective 1 January 2015, the reverse-charge mechanism has been extended to import VAT due upon the importation of goods into France, under strict conditions. Eligible operators could avoid the cash outflows associated with import VAT.

In addition, specific domestic reverse-charge rules apply to the following:

  • Delivery of natural gas and electricity
  • Supplies of gold or golden products with a purity of more than 325/1000
  • Supplies and work performance on new industrial waste and recoverable material
  • Transfer of allowances to emit greenhouse gases
  • Electronic communications services
  • Construction work, including repair, cleaning, maintenance, reconstruction and demolition services related to immovable property carried on by a subcontractor

Registration procedures for non-established entities. Registration requires completing Form IMP (EU persons) or Form M0 (non­EU persons) and the form’s appendix describing the activity to be performed in France.

The registration form must indicate the address of the company, its main activity and the address where the company keeps its accounting records. Moreover, the company must attach a cer­tificate of registration in the Trade and Companies registry in its country as well as the original of a certificate of taxable person status delivered in its EU Member State. Finally, the applicant must justify its intention to perform taxable activities in France.

Businesses established outside of the EU must include with their applications the “proxy” appointing the fiscal representative (see above).

The complete file is to be sent to the following tax office for EU businesses:

Service des Impôts des Entreprises Etrangères 10, rue du Centre

TSA 20011

93465 Noisy-Le-Grand Cedex, France

The VAT registration is free of charge and no guarantee is required. It generally takes two to four weeks to obtain a VAT number.

Late-registration penalties. No specific penalty is imposed for late VAT registration. However, interest and penalties apply if a return is absent and if a late registration results in the late pay­ment of French VAT.

Digital economy. Articles 6a, 6b and 7 of EU Regulation 282/2011 provide a non-exhaustive (but legally binding) list of services covered by the terms “telecommunications services,” “broadcast­ing services” and “electronically supplied services.” For busi­ness-to-business transactions, the place of supply of such services to a taxable person shall be the place where that taxable person has established his or her business. Consequently, these services are taxable in France when the recipient acting as a tax­able person has a fixed establishment or permanent address in France or usually resides in France.

Until 31 December 2014, in respect of services supplied to non­taxable persons (B2C transactions), the place of supply was the place where the supplier was established. As from 1 January 2015, the place of supply of B2C transactions is modified for telecommunication, broadcasting and electronically supplied services. Where supplied to an EU-based recipient, they are tax­able in the Member State of location of the customer.

Mini One-Stop Shop (MOSS). As from 1 January 2015, a MOSS regime came into effect, allowing taxable persons that supply telecommunication services, television and radio broadcasting services or electronically supplied services to nontaxable persons (“consumers”) in Member States in which they do not have an establishment to avoid registering, filing and paying VAT in each Member State of consumption.

They are able to account for VAT due on those supplies via a web portal in the Member State in which they are identified. These electronically supplied services are then subject to the VAT rate in force in the customer’s EU Member State.

Two schemes are available. The EU scheme allows taxable per­sons established in France that deliver electronically supplied B2C services in Member States in which they are not established to file returns and pay the VAT owed on these services through a single portal. In the non-EU scheme, traders established outside the EU delivering electronically supplied services to nontaxable persons residing in the EU can also register with the MOSS in only one Member State even if they have customers in several Member States.

As from October 2014, taxable persons established in France or established outside the EU may register for MOSS via the e-ser­vice “access the Mini One-Stop Shop” on the tax web portal (http://www.impots.gouv.fr). After registration, the taxable per­son will be able to file returns and pay VAT owed on digital dis­tribution service provided to consumers residing in other Member States. In order to be identified for MOSS, the company must have an “espace professionnel” (trader’s subscriber section) on the web portal and have opted for the service “consulter: compte fiscal.” Registration will take effect from the first day of the calendar quarter following that in which the taxable person informs the French tax administration of the intention to start using the scheme.

Deregistration. When ending economic activities, a company has to file a specific form (M4 for non-EU businesses/“declaration de cessation” for EU businesses) within 30 days (extended to 60 days under certain circumstances) following the date of the end of activity. This form must list the transactions performed by the company during this period and the ending date of the activity.

The company is required to regularize its position before the tax authorities, depending on whether it is in a VAT credit position (net input VAT to be refunded) or in a VAT debit position (net output VAT due). In the first case, the company can apply for a refund of its VAT credit within a period of 30 days running as from the date of the end of activity. In the second case, the com­pany must settle the remaining VAT due through the filing of its VAT return.

Usually, the company will not be allowed to deduct the input VAT due on costs incurred after the date of the end of activity.

VAT rates

The term “taxable supplies” refers to supplies of goods and ser­vices that are subject to VAT, including a reduced or super-reduced rate. The term “exempt supplies” refers to supplies of goods and services that are within the scope of VAT but that are not liable to tax. In principle, exempt supplies do not give rise to a right to recover input tax on related expenditure (see Section F). Some supplies are classified as “exempt with credit,” which means that no VAT is chargeable, but the supplier may recover related input tax. Exempt with credit supplies include the following:

  • Specified financial transactions
  • Exports of goods outside the EU and related services
  • Intra-Community supplies of goods

Mainland France. In mainland France, the following are the VAT rates:

  • Standard rate: 20%
  • Reduced rates: 2.1%, 5.5% and 10%

The standard VAT rate applies to all supplies of goods or services, unless a specific measure provides for a reduced rate or exemption.

Examples of goods and services taxable at 2.1%

  • Pharmaceuticals (under conditions)

Examples of goods and services taxable at 5.5%

  • Foodstuffs

Examples of goods and services taxable at 10%

  • Accommodation

Corsica. On the island of Corsica, the standard rate is 20%. However, rates of 0.9%, 2.1%, 10% and 13% apply to specified goods or services. The 0.9% rate applies to the first performance of certain theatrical performances and circuses. The 2.1% rate applies to the supplies of certain goods and services that are sub­ject to the reduced rate of 5.5% in mainland France. The 10% rate applies to work on immovable property, to agricultural equipment and to sales of restaurant food for consumption on the premises. The 13% rate applies to petroleum products.

Overseas Dependencies (Guadeloupe, Martinique and Réunion). In the Overseas Dependencies of Guadeloupe, Martinique and Réunion, the standard rate is 8.5%. A reduced rate of 2.1% applies to the supplies of goods and services that are subject to the 5.5% rate in mainland France. A special VAT rate of 1.05% applies to periodicals. A special VAT rate of 1.75% applies to the sale of livestock to nontaxable persons.

Exempt supplies. The term “exempt supplies” refers to supplies of goods and services that are within the scope of VAT but that are not liable to tax. In principle, exempt supplies do not give rise to a right to recover input tax on related expenditure but specific provisions can grant the right to recover input VAT on exempt supplies (see below and Section F).

Examples of exempt supplies of goods and services

  • Land under specific conditions
  • Financial transactions
  • Buildings completed for more than five years
  • Insurance
  • Education
  • Health and welfare
  • Betting and gaming

Some supplies are classified as “exempt with credit,” which means that no VAT is chargeable, but the supplier may recover related input tax. Exempt-with-credit supplies include the follow­ing:

  • Certain financial transactions (where invoiced to non-EU cus­tomers)
  • Exports of goods outside the EU and related services
  • Intra-Community supplies of goods

Option to tax for exempt supplies. Taxable persons performing economic activities that are exempt of VAT may, under express legal provision, be able to apply VAT on such activities. As a result, the taxpayer will be able to recover the VAT credit incurred on the goods or services. Option to tax for VAT may exempt the taxpayer from payroll tax if at least 90% of its turnover becomes VAT taxable.

Examples of exempt supplies of goods and services for
which there is an option to treat as taxable

  • Leasing of unfurnished buildings to professionals
  • Leasing of agricultural assets
  • Specific public services provided by local public authorities
  • Supplies of undeveloped lands
  • Supplies of buildings completed for more than five years
  • Certain transactions of bank establishments

Time of supply

In France, the time when the legal conditions necessary to deter­mine the VAT liability are fulfilled is called the “chargeable event,” while the time when VAT becomes due and recoverable is called the “tax due point” (chargeability of VAT). Different tax event rules and tax due point rules apply to supplies of goods and supplies of services.

The general rule is that the tax event and the tax due point for goods occur at the same time. They occur when the right to dis­pose of the goods as owner is transferred. If the sale contract stipulates that the supplier retains ownership of the goods, the tax is due at the moment of the physical transfer of the goods from the supplier to the buyer.

The tax event for services is the moment when the services are performed, while the tax due point is the date of the effective pay­ment. However, the supplier may opt to account for VAT on an accrual basis; that is, when the services are rendered and the invoice is issued (option pour les débits – option for the debit rule). In principle, if the consideration for a supply of services is paid in installments, VAT is due on the receipt of each install­ment.

Reverse charge. The time of supply for a domestic reverse-charge service received by a French taxable person is the date of pay­ment for the service, unless the recipient of the service has opted to account for VAT on an accrual basis. With regard to a cross-border reverse charge, the tax point is when the service is sup­plied, without options.

Intra-Community acquisitions. The tax event for an intra-Commu­nity acquisition of goods is the moment of the introduction of the goods in France. The tax due point is the 15th day of the month following the month in which the acquisition occurred. If the supplier issues an invoice before this date but after the tax event, the tax due point is the date of the invoice.

Imported goods. The time of supply for imported goods is either the date of importation or the date on which the goods leave a duty suspension regime.

Cash accounting. France has not implemented the optional scheme under Article 167bis but has implemented Article 66b (as referred to in Article 167bis) for supplies/receipt of services only.

Continuous supplies of services. In the case of installment pay­ments or continuous payments with respect to continuous sup­plies of services, the chargeable event occurs at the end of the periods to which such installments or payments refer. However, for continuous supplies of services over a period of more than one calendar year, subject to the non-domestic reverse charge, which do not give rise to installments or continuous payments during that period, the tax event occurs on expiry of each calen­dar year until such time as the supply of services comes to an end.

Continuous supplies of goods. In the case of installment or fre­quent payments with respect to continuous supplies of goods, the chargeable event occurs at the end of the periods to which such installments or payments refer. However, for continuous intra­Community supplies or acquisitions of goods over a period of more than one calendar month, which do not give rise to install­ments or payments during that period, the tax event occurs on expiry of each calendar month until such time as the supply or acquisition of goods comes to an end.

Prepayments. The collection of advance payments (prepayments) for supplies of goods does not give rise to VAT (except in the case of continuous supplies of goods).

The tax due point for advance payments for services occurs on collection of the payment.

Intra-Community supplies of goods. The tax event for an intra­Community supply of goods is the moment of the shipment of the goods from France. The tax due point is the 15th day of the month following the month in which the shipment occurred. If the supplier issues an invoice before this date but after the tax event, the tax due point is the date of the invoice.

However, specific rules might be applicable in respect of tax due point. For instance, for a contract of sale with a retention-of-title clause, VAT is due when the good is physically delivered.

Leased assets. A leasing contract of goods is an agreement whereby the lessor (the owner) contracts the use of the good to the lessee (the person who leases) in return for a consideration. At this stage, lease incomes received by the lessor during the period of the lease agreement are VAT taxable pursuant to the collection rules applicable to the supplies of services.

At the end of the lease period, should the lessee opt for the pur­chase of the good, VAT is chargeable upon the transfer of the right to dispose of the asset.

Recovery of VAT by taxable persons

A taxable person may recover input VAT charged on goods and services supplied to it for business purposes. A taxable person generally recovers input tax by offsetting it against output VAT charged on supplies made. Input tax includes VAT charged on goods and services supplied in France, VAT paid on imports of goods and VAT self-assessed by the taxable recipient under the reverse-charge mechanism.

A valid tax invoice or customs document is compulsory for a VAT refund claim.

Nondeductible input tax. Input tax may not be recoverable on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use). Furthermore, input tax may not be recoverable on certain busi­ness expenditures.

The following lists provide some examples of items of expendi­ture for which input tax is not recoverable and examples of items for which input tax is recoverable, except in specific cases.

Examples of items for which input tax is not recoverable

  • Hotel accommodation for employees
  • Petrol
  • Transport of passengers
  • Purchase, lease and maintenance of passenger cars
  • Business gifts valued at more than EUR65 including VAT (EUR69 since 10 June 2016), per person per year

Examples of items for which input tax is recoverable
(if related to a taxable business use)

  • Restaurant meals and entertainment for employees and clients
  • Hotel accommodation for clients
  • Attending conferences, exhibitions and training seminars
  • Books
  • Motorway tolls
  • Liquefied petroleum gas (LPG)
  • Purchase, lease and maintenance of vans and trucks
  • Diesel fuel (up to 80%); petrol used in vehicles excluded from deduction rights (up to 10% from 1 January 2017)
  • Advertising
  • Business use of a home telephone

Partial exemption. Input tax directly related to exempt supplies is not generally recoverable. If a French taxable person performs both exempt supplies and taxable supplies, it may only recover a portion of input tax. This situation is referred to as “partial exemption.”

In France, the amount of input tax that may be recovered is cal­culated in the following two stages:

  • The first stage identifies the input VAT that may be directly allocated either to exempt or to taxable supplies. Exempt-with­credit supplies are treated as taxable supplies for these purposes. Input tax directly allocated to exempt supplies is not deductible. Input tax directly allocated to taxable supplies is fully recover­able.
  • The second stage prorates the input tax on mixed expenditures (relating to both taxable and exempt supplies) in order to allo­cate a portion to taxable supplies (which may be recovered). For example, this treatment applies to the input tax on general busi­ness overhead expenses.

Alternatively, a taxable person may apply the recovery ratio to all expenditures for the acquisition of goods and services.

A taxable person that performs within the same business entity different types of business activities that are subject to different VAT rules (referred to as “Separate Business Units”) must main­tain separate accounts for each branch of activity and compute its recovery rights separately for each business unit.

Capital goods. Capital goods are items of capital expenditure that are used in a business over several years and thus qualify as fixed assets. Input tax is recoverable in the VAT year in which the goods are acquired. The amount of input tax recoverable depends on the VAT recovery ratio in the year of acquisition. However, the amount of input tax for capital goods initially deducted might have to be adjusted over a reference period if the VAT recovery ratio varies by more than 10 percentage points (since 1 January 2008) over the adjustment period, depending on the effective use of the fixed assets.

In France, the capital goods adjustment applies to the following assets for the number of years indicated:

  • Buildings: for 19 years following the year in which they are acquired (that is, 20 years in total). This rule applies to build­ings acquired on or after 1 January 1996.
  • All other fixed assets: for four years after the year in which they were purchased, acquired under an intra-Community acquisition, imported or used for the first time (that is, five years in total).

Adjustment is required each year following the acquisition, to a fraction of the total input tax (1/20) for land and buildings and 1/5 for other fixed assets). The adjustment may result in either an increase or a decrease of recoverable input VAT, depending on whether the ratio of taxable supplies made by the business has increased or decreased compared with the year in which the fixed asset was acquired.

Further adjustments might be required upon the disposal of fixed assets (or similar events) within the adjustment period.

Refunds. If the amount of input tax recoverable in a monthly period exceeds the amount of output tax payable in that period, the taxable person has an input tax credit. The input tax credit may be carried forward to offset output tax in subsequent return periods, until it is used up.

A refund of the input tax credit may be requested at the end of the calendar year if the total amount refundable is at least EUR150. A refund may also be requested at the end of a calendar month or quarter if the amount refundable is at least EUR760.

VAT refund claims must be reported on Form 3519 for persons VAT-registered in France. Non-VAT-registered EU taxable per­sons seeking a refund of French VAT should apply online (see Section G).

Preregistration costs. Newly created companies may claim a refund of input VAT paid on expenses incurred before registra­tion, back to the point in time when they expressed their intention to perform economic activities. Documentation useful to show such an intention may include a statement of existence, a VAT registration certificate, evidence of market investigation and marketing expenses, etc.

Write-off of bad debts. A taxable person may recover input VAT paid on unpaid invoices when the debt is officially unrecoverable, which occurs when the supplier has exhausted all legal remedies against the debtor. However, VAT may be recovered further to a judgment of liquidation or a judgment granting a recovery plan. Therefore, a mere default of recovery does not enable the sup­plier to qualify the debt as definitely unrecoverable and to claim a refund.

Bad debt relief rules are applicable only to supplies for which the tax point arises before the receipt of payment. Consequently, VAT refund difficulties mostly arise regarding supplies of goods. For supplies of services, the tax point occurs at the date of the effec­tive payment, so bad debt relief rules are only applicable which the taxpayer has opted to pay VAT under the invoice dates regime (option pour les débits) under which VAT is due at the time when the debt is recorded).

Noneconomic activities. Noneconomic activities shall be taken into account in the computation of the VAT recovery ratio which will enable a taxable person to determine its deductible input VAT, specifically as to the assessment of the first and second of the three relevant ratios.

The first relates to the direct allocation of purchased goods or services to the execution of economic activities falling within the scope of VAT (coefficient d’assujettissment). The second ratio concerns the operation opening a VAT deduction right (coeffi­cient de taxation). The third ratio addresses specific rules that might limit the input VAT deduction right (coefficient d’admission).

Recovery of VAT by non-established businesses

Businesses that are neither established in France nor registered for VAT may request the refund of input VAT. Non-established businesses may claim French VAT to the same extent as VAT-registered businesses.

For businesses established in the EU, refund is made under the terms of EU Directive 2008/9/EC. For businesses established outside the EU, refund is made under the terms of the EU 13th Directive. France does not exclude any non-EU countries from the refund process.

For the general VAT refund rules under the EU Directive 2008/9/ EC and 13th Directive refund schemes, see the chapter on the EU.

Refund application. Under the EU 13th Directive, the deadline for refund claims is 30 June of the year following the calendar year in which the tax is incurred. This deadline is strictly enforced.

The minimum claim period is three months. The maximum claim period is one year. The minimum claim for a period of less than a year is EUR400. For an annual claim, the minimum amount is EUR50 extended to 30 September of the year following the calendar year in which the tax is incurred.

Claims must be submitted in French. The application for refund must be accompanied by the appropriate documentation (see the chapter on the EU).

Applications for refunds of French VAT must be sent to the fol­lowing address:

Service de remboursement de la TVA aux assujettis étrangers

10 rue du Centre

TSA 60015

93 465 Noisy-Le-Grand Cedex

France

VAT refund claims filed under the EU Directive 2008/9/EC pro­cedure must, in principle, be submitted electronically. VAT refund claims filed under the EU 13th Directive procedure are still to be submitted on paper.

Repayment interest. If the refund is not made within required time limits, the French VAT authorities must pay interest to the claimant provided the refund claim complies with all require­ments.

Invoicing

VAT invoices and credit notes. A French taxable person generally has to provide a VAT invoice for all taxable supplies performed for the benefit of other taxable businesses or nontaxable legal entities, including exports and intra-Community supplies. Invoices are not automatically required for retail transactions, unless requested by the customer. An invoice must be issued as soon as the supply has taken place.

A commercial invoice is necessary to support a claim for input tax under the domestic procedure or a refund under the EU Directive 2008/9/EC or 13th Directive refund schemes (see the chapter on the EU).

Under the French Administrative Guidelines, a VAT credit note may be used for transactions involving French clients to correct the VAT amount charged and reclaimed on a supply. The VAT amount credited must be separately itemized and it must be cross-referenced to the original VAT invoice.

Electronic invoicing. As from 1 January 2013, VAT law permits electronic invoicing in line with EU Directive 2010/45/EU. All formats of e-invoices are accepted, but authenticity of the origin, integrity of content and legibility must be satisfied from the invoice’s date of issuance through the end of the archiving period.

In the case of invoices not issued in the Electronic Data Interchange (EDI) format or electronically signed with a quali­fied certificate, business controls must be put in place that dem­onstrate the existence of a reliable audit trail between the invoice and the underlying transaction. This would apply notably to e-invoices sent by e-mail.

Proof of exports and intra-Community supplies. French VAT is not chargeable on supplies of exported goods or on intra-Community supplies of goods (see the chapter on the EU). However, to qualify as VAT-free, exports and intra-Community supplies must be supported by evidence indicating that the goods have left France. Acceptable proof includes the following documentation:

  • For export, a copy of the export document, officially validated by customs and showing the supplier as the exporter. Other acceptable proof of export may be provided. The sales invoice must include specific wording.
  • For intra-Community supply, the supplier must include the purchaser’s EU VAT identification number on the sales invoice and specific wording. The supplier must also retain commercial documentation (for example, purchase orders, transport docu­mentation, proof of payment and a copy of the customer’s invoice stamped for receipt of the goods).

Foreign-currency invoices. If a French VAT invoice is issued in a foreign currency, the VAT amount to be paid must be converted into euros using the rate published by the European Central Bank for the date of the supply. For intra-Community transactions, the customs rate (published monthly) may be used. If a taxable per­son chooses to use the customs rate, such rate must be used for all intra-Community trade, for at least one calendar year for both VAT returns and Intrastat returns.

B2C invoices. Effective 1 January 2015, new rules applied to the place of supply for supplies of telecommunications, broadcasting and electronic services to non-VAT taxable customers.

French VAT rules do not set requirements as to the issuance of invoices for supplies of telecommunications, broadcasting or electronic services to non-VAT taxable private individuals. However, requirements are defined by the Commercial Law. As from 1 April 2015, the invoice should include additional informa­tion on these services:

  • The total amount including VAT and the corresponding VAT basis
  • The total amount including VAT of the services rendered by the service provider and corresponding VAT basis
  • Total amount including VAT of the services rendered by third parties and corresponding VAT basis.

The invoice shall comprise two sections, one referring to the services rendered by the operator and another one to the services delivered by third parties. The first section shall be organized in three parts:

  • The subscription, all-inclusive packages and options
  • Communications
  • Other services and product of the operator

The second section shall be organized in two parts:

  • Subscriptions with third parties
  • Temporary services from third parties

These five parts must show detailed information on the services such as reference periods, quantities of goods or services, rebates, communications included in the subscription or not. For prepaid electronic communication, a simplified document can be issued as from 10 January 2014. As regards non-VAT taxable legal entities, an invoice shall be delivered under the French VAT rules.

Paper and electronic invoices must be archived in their originally issued form for a period of six years. French administrative guidelines distinguish between requirements for purchase invoic­es and sales invoices.

  • Purchase invoices must be archived in paper form when received in paper; a paper purchase invoice digitized for archiving does not qualify as an electronic invoice. Electronic invoices must be stored in electronic format (the original one under which they were received).
  • Sales invoices must be stored in electronic format if they were received in electronic format; for paper invoices, the tax author­ities will accept archival storage of a copy in a form other than paper provided that certain conditions regarding integrity of the invoices are met.

As from 1 January 2017, paper invoices received and issued can be archived under paper format or electronic format during the period of six years. However, such possibility will be in force only when the specific decree describing the digitization process allowed will be published (at the latest by 31 March 2017).

VAT returns and payment

VAT returns. The applicable VAT return period depends on the taxable person’s turnover. As from 1 January 2015, the following criteria apply:

  • Companies following the normal regime (régime réel normal) file returns monthly. There are two categories of taxpayer that must follow the normal regime:
    • Companies whose turnover exceeds EUR788,000 (goods) or EUR238,000 (services)
    • Companies whose output VAT due exceeded EUR15,000 the preceding year
  • Companies following the simplified regime (régime réel sim- plifié) file returns quarterly and annually. These are two catego­ries of companies that can follow the simplified regime:
    • Companies whose turnover is between EUR82,800 and EUR788,000 (goods) or between EUR33,100 and EUR238,000 (services), and whose output VAT due the previous year was less than EUR15,000
    • Companies whose turnover exceeds EUR788,000 (goods) or EUR238,000 (services) but whose total output VAT due dur­ing the previous calendar year did not exceed EUR4,000
  • Companies that are not required to file a VAT return are those whose turnover is less than EUR82,800 (goods) or EUR33,100 (services).

For French and non-EU companies, monthly VAT returns and payment are due between the 15th and the 24th day of the month following the end of the return period. The due date depends on several factors including the type of legal entity involved and where the taxable person is established.

For EU entities, monthly or quarterly VAT returns are due on the 19th day of the month following the end of the return period.

Special schemes. In certain circumstances, taxpayers may opt to file VAT returns and pay VAT due under the installment payment scheme, pursuant to which the deadline for filing is extended. However, an installment shall be approved by tax authorities before the initial deadline.

As mentioned in Section C, the franchise regime is applicable to small French-established businesses following the below thresh­olds (effective 1 January 2017):

  • Sales of goods: EUR82,800
  • Supplies of services: EUR33,100

Special rules are also applicable for real estate operations or for agricultural activity.

Electronic filing. As from 1 October 2014, businesses (including foreign businesses, but except small companies and auto-entre­preneurs under certain circumstances) must file their VAT returns and settle the VAT due electronically. For companies not established in France but VAT-registered in France, electronic filing is required but not electronic payment.

A notice is currently available on the official website (in French): http://www.impots.gouv.fr. The “TéléTVA” process can be used through one of these two methods:

  • The “EDI” procedure using UN-EDIFACT standards (échange de données informatisées): the data will be transmitted to the tax office by the intermediary of an “EDI partner” accredited as such by the tax administration. The EDI partner can be the taxpayer itself provided the accreditation has been granted.
  • The “EFI” procedure (échange de formulaires informatisés): the taxpayer declares and settles the VAT due through the tax authorities’ official website http://www.impots.gouv.fr. The taxpayer must have previously connected to this website and, by filling in the required information, created an account in the trader subscription section (Espace professionnel). When that is done properly, an activation code is sent to the taxpayer. Once the account is activated, the taxpayer has access to the VAT fil­ing space. For foreign businesses, it is necessary to have a SEPA account to be able to settle the VAT due electronically (no need for a French bank account).

The taxpayer must first approach the tax administration in order to be registered on a compulsory or voluntary basis.

In case electronic filing and payment obligations are not respect­ed, a 0.2% penalty (assessed on the VAT due) is applicable.

Annual returns. Businesses falling into the scope of the simpli­fied regime (régime réel simplifié) are obliged to file an annual return (CA12). In contrast, businesses subject to the “régime réel normal” scheme do not have to file annual VAT returns.

Penalties

The following penalties are assessed for errors associated with electronic filing:

  • Failure to declare VAT by electronic means: 0.2% of the VAT due
  • Failure to pay VAT by electronic means: 0.2% of the VAT due

The following penalties are assessed for the late submission of VAT and late payment of VAT:

  • Late payment: 5% of the tax due
  • Late submission: 10% of the tax due if the French VAT author­ities have not yet issued a formal notice
  • Payment more than 30 days after the first formal notice of a late submission: 40% of the tax due
  • Second formal notice of a late submission: 80% of the tax due

In addition to the penalty, interest accrues at a rate of 0.4% per month.

Penalties and interest payments may also apply to inaccurate returns.

For inaccurate invoices, the following penalty applies:

  • EUR15 per missing mandatory information per invoice (listed in Directive 2006/112/EC)

EU filings

Intrastat. A taxable person that trades goods from and within France with other EU countries must complete statistical reports, known as Intrastat, if the value of its sales or purchases exceeds certain thresholds. Separate reports are required for intra-Com­munity acquisitions (Intrastat Arrivals) and for intra-Community supplies (Intrastat Dispatches).

For 2017, the threshold for Intrastat Arrivals is EUR460,000. No threshold applies for Intrastat Dispatches.

Taxable persons must complete Intrastat declarations in euros.

Intrastat returns are to be filed monthly. The submission deadline is the 10th day of the month following the end of the return period.

The penalty for late filing is EUR750, increased to EUR1,500 if the report is not filed within 30 days after the French customs authorities have issued a warning notice. In addition, every omis­sion or inaccuracy on an Intrastat return is punishable by a fine of EUR15. The fine cannot exceed EUR1,500 per Intrastat return. A penalty of EUR1,500 may also apply if a taxable per­son refuses to provide information or documents to the French customs authorities.

EU Sales Lists. In France, all information related to intra-Com­munity transactions is reported using the Intrastat form. No sepa­rate EU Sales List (ESL) is to be filed.

As a result of the implementation of the VAT package, effective from 1 January 2010, an ESL for services must, in principle, be filed with respect to services provided by French suppliers to cus­tomers registered for VAT in the EU in specified circumstances. The ESL for services has to be submitted electronically on the web-portal of the French customs administration on a monthly basis.