Import VAT reverse-charge will be automatically applied as from January 2022 in France.

Starting 1 January 2022, the French tax authorities have announced that the import VAT will be automatically and mandatorily reported in the French VAT returns under the reverse charge mechanism by those taxpayers with a French VAT number. This means that instead of advancing the payment of import VAT at Customs, taxpayers will be able to directly declare it in the VAT return following the Reverse Charge mechanism – ie., to declare it as payable and deductible in the same return, so the VAT impact is zero. This is a great cash flow advantage for those businesses making imports in France, who will not have to advance the VAT at Customs.

This change results from the transfer of competences on import VAT from the Customs authorities (the DGDDI, standing for Direction Générale des Douanes et Droits Indirects) to the Tax authorities (the DGFiP standing for Direction générale des Finances publiques). The import VAT reverse-charge will be mandatorily and automatically applied.

At the moment, the reverse charge on import VAT (ATVAI) is only possible upon request to the French tax authorities. Companies that would like to benefit from this simplification need to specifically request it to the Customs authorities, follow the procedure and, if conditions are met, then they are granted with an import license to reverse charge the VAT in the corresponding return. Some of these current requirements are:

• The company must have performed at least 4 importation of goods in the EU in the past 12 months.
• Having a reliable booking system recording all the imports information.
• No serious or repeated offences to the tax and customs regulation for the past 12 months.
• If the company is non-EU, then will also need to appoint a customs broker with the AEO Status.

Since 1 January 2022 it will not be necessary to make this specific request and / or meet the above requirements in order to apply import VAT reverse charge.

How VAT returns will be impacted by this update?

French VAT returns will be adapted to facilitate the application of the new measure. See below the main updates:

• The 14th day of the month, the VAT return will show the import VAT amounts pre-filled, based on the amount previously reported to the Customs authorities.
• The customs authorities (douane.gouv.fr) will offer a service to check the detail of the pre-filled import VAT amount appearing on the VAT return.
• The deadline for submitting VAT returns will be moved to the 24th of the following month for those taxpayers making imports in France.

The import VAT pre-filled must be reviewed by the taxpayer, and it can be modified if necessary. Also, the taxpayer is responsible to obtain the relevant import documents before validating the pre-filled amounts, and to complete these amounts if necessary.

Who will be impacted by the import VAT reverse charge in France?

This simplification will be mandatory for all businesses with a valid VAT number in France making imports in the country.

Despite the cash-flow advantage, these changes will require more administration from businesses to manage French import VAT. Foreign, non-VAT registered, companies importing goods in France and selling these goods under the domestic reverse charge mechanism will now have to register and self-account the import VAT in their VAT returns. In practice, these businesses will no longer recover VAT via the EU standard or 13th Directive mechanism. Instead, they will register for VAT and self-account the import VAT in their French VAT returns. 

Special attention should be paid to the following scenarios:

• If you are subject to the simplified VAT regime (régime simplifié d’imposition or RSI), and you are making imports in France, you will need to inform your tax office to switch to the regular VAT regime (régime réel normal). Since this update is mandatory, the RSI can no longer be applied to your business.
•  If you are under a VAT franchise regime (régime de franchise en base de TVA) in France, the imports made must also be reported in the VAT return.
• If you are subject to a customs and VAT warehouse (régimes fiscaux suspensifs (RFS)) now the tax authority will be the main contact (DGFiP). In consequence, when clearing goods from a customs and VAT warehouse, the tax base – taxable or not, will be declared in the VAT return (information not pre-filled).