France urges to voluntarily regularize distance sales made before July 2021
France opens a period of voluntary regularization for distance sellers who missed paying VAT in France according to the former distance sales rules. This period ends by 30 September 2022.
14 June, 2022
France has opened a period for voluntary regularization of distance sales made by foreign companies to private individuals in France when, according to the former rules, these sales were taxable in France. The tax authorities published this information in a letter dated May 2022.
Following the introduction of the new e-commerce rules and OSS regimes simplifying the reporting obligations of distance sellers, some businesses have noticed that according to the VAT rules for distance sellers previous to 1 July 2021 they should have paid VAT on their sales elsewhere.
Have a look at our manual about European VAT rules for e-commerce.
As a consequence, there are foreign companies that exceeded the distance sales threshold for France regarding sales made to French customers. They paid wrongly VAT in the country of departure of their distance sales, while they should have paid it in France. The French tax authorities are opening a voluntary disclosure period until September 2022 for these companies: if they regularize their sales in France only the payment of the VAT and legal interest will be due following the regularization, and the no additional penalties.
Also, it could be the case that French established companies want to regularize the VAT paid wrongly in France – as the country of departure of the distance sales, while this VAT was due in other EU countries. In order to avoid double taxation and make things easier for these taxpayers, French tax authorities published a ruling informing about the procedure and specifics on claiming back the French VAT wrongly paid to the tax administration (BOI-RES-TVA-000100).
Who can opt for the voluntary period for VAT regularization in France?
The measure targets the distance sellers who, having exceeded the distance sales threshold for France, they wrongly paid VAT in the country of dispatch of the goods, when this VAT should have been paid in France.
These are the conditions to benefit from this special voluntary disclosure mechanism in France:
- The taxpayers that have voluntarily disclosed the missing payments, and have spontaneously initiated the regularization procedure. It is excluded from this mechanism the taxpayers that are already subject to a tax audit.
- The taxpayers who have paid the VAT for these distance sales transactions in the country of dispatch of the goods.
Also, the process must be initiated before 30 September 2022.
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How to submit for the voluntary disclosure?
The regularization packs must be submitted before 30 September 2022 to the tax office for foreign companies, the SIEE - Service des impôts des entreprises étrangères.
The regularization pack will include:
- A brief and clear explanation of the reason for the VAT regularization, indicating the VAT amount to be paid per year, as well as proofs of the transactions performed.
- The corrective VAT returns (form CA3) prepared either in paper or electronic format.
Also, the taxpayer must justify that they have not requested a VAT refund in the country of departure of the goods for the VAT wrongly paid for a period longer than the period covered by the regularization. In case the VAT refund has already been made by the member State, then the taxpayer must include the documents and proof related to this reimbursement in the regularization pack.
French tax authorities will communicate with the competent tax authorities in the country of departure of the goods to ensure the correct information is provided.
The VAT payment for regularization will only be accompanied by late payment interest at the legal rate (CGI article 1727), following the voluntary disclosure procedure.
VAT refund of French VAT wrongly paid
The tax authorities published the response to those taxpayers who want to request a refund of the VAT wrongly paid in France, following the regularization and VAT payment in the member State country of destination of the goods – according to the former distance sales rules.
This consists of submitting a VAT refund claim to the competent tax office, which must be accompanied of the proof concerning the distance sales made, as well as the proof of payment of the VAT to the French tax administration.