France confirms fine for failure to reverse charge

France confirms that 5% fine for failure to reverse charge VAT is constitutional.

France confirms that the 5% fine for failure to reverse charge the VAT is constitutional, as the French Constitutional Council ruled from 22 September 2022 (Décision n° 2022-1009 QPC du 22 septembre 2022). Consequently, not reporting a reverse charge transaction correctly in the VAT return when the taxpayer is allowed to deduct input VAT is a vital failure subject to a 5% penalty.

Despite the understanding of the State’s Council concerning this 5% penalty, the recent decision from the French Constitutional Council is considered constitutional because:

  • The fine aims to ensure the fulfillment of the reverse charge reporting obligation. Although the VAT impact is usually nil, the self-assessment of VAT in reverse charge transactions is essential for monitoring and collecting the VAT at each economic stage.
  • By fixing the fine in proportion to the amount the taxpayer is allowed to deduct, the penalty is linked to the nature of the infringement.
  • The 5% penalty shall not be considered disproportionate given the nature of the severity.

See here our article explaining What is the reverse charge? and also the section from our French manual How to apply reverse charge in France?

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