VAT in France
French VAT rates
Value Added Tax in local language is "Taxe sur la valeur adjoute". The French VAT rates are as follows:
- Standard rate: 20%
- Reduced rates: 10%, 5.5% and 2.1%
France has opted for the reduced and super-reduced VAT rates on a number of items allowed by the VAT Directive. The French super-reduced rate is the lowest in the EU (source: European Commission):
Foodstuff20%, 10% or 5.5% depending on the item.
Pharmaceutical products5.5%, 10% and 20%*
Medical equipment for disabled persons5.5%
Children´s car seats20%
Books5.5% and 20% (standard rated only if violent or pornographic content)
Books on other physical means of support5.5% and 20% (standard rated only if advertising or pornographic content)
Admission to cultural services (theatre, etc)5.5% and 20%
Admission to amusement parks10% and 20%
Pay TV / cable10%
Writers / composers5.5%
Restaurant and catering services10%
Admission to sporting events5.5%
Medical and dental care0%
Shoes and leather goods20%
Clothing and household linen20%
* France also introduced a super-reduced rate of 2.1% on the following items: certain pharmaceutical products; certain newspapers and periodicals; TV licenses; and admission to certain cultural events."
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French VAT deductions Limits
As a general rule, French VAT can be deducted as long as it is incurred for business purposes and all formalities are met. More specifically, the following deduction rules apply:
- Input VAT on hotel accommodation of employees is not deductible. Where these costs are incurred by third parties and the business purpose test is met, 100% deduction is allowed.
- VAT on restaurant meals is deductible as long as the name of the company is stated on the invoice.
- Input VAT on conferences, fairs and exhibitions is normally 100% deductible.
- Taxi, car rental, car repair, train and bus expenses are 0% deductible. Motorway tolls are 100% deductible.
- Entertainment expenses are generally 100% deductible.
- With respect to fuel expenses, VAT on diesel is 80% deductible, but petrol is up to 10% deductible in 2020. VAT deduction allowance on petrol will increase gradually in the next years.
- Expenses on gas-fuel such as kerosene are 100% deductible
- Business gifts are not deductible if the value exceeds EUR 73.
Deducting VAT prior to the beginning of the economic activity is only allowed under certain conditions. The expenses should be connected with the expected business and, more importantly, a compliant invoice must be issued for these costs. You can find here additional information about input VAT deduction, published by the French tax authorities.
French Statute of limitations
Input VAT should be claimed in a VAT return filed no later than the end of the second year following the year during which the deductible VAT was due.
Regarding the obligation to pay VAT, the same general rule applies. The French tax authorities con investigate VAT liabilities up to the end of third year following the year in which VAT became due. There is an extended period of 10 years in case of fraud or "hidden activity".
There is more information available (in French) on the French tax authorities' website.
French tax point rules
The tax point is the time when VAT becomes due. VAT due should be distinguished from VAT payable. VAT is due when the tax point occurs. VAT is payable between the day after the end of the reporting period and the due date to submit and pay the VAT return.
- General rule: VAT becomes due when the goods are put at the disposal of the customer or when the service is completed. If there is a prepayment made for a provision of services, the tax point is moved to the date of this prepayment. Unlike other EU countries, pre-payments on sales of goods do not create a tax point.
- Prepayments or advanced payments create a tax point on supplies of goods and services. From January 2023, VAT becomes due upon receiving the prepayment or advanced payment, also allowing taxpayers to also deduct the output VAT paid from the first installment. Find here the official information about this topic.
- Intra-Community acquisitions: Tax point occurs when the goods enter France. An invoice must be issued by the 15th day of the following month.
- Intra-Community supplies: Tax point occurs when the goods ship from France. An invoice must be issued by the 15th day of the following month.
- Import: Tax point occurs when the goods are imported according to the relevant import documents.
- Continuous supplies of services: If periodic payments are made for the provision of services, the tax point arises at the end of the period to which the payment relates to. If there are no periodic payments and the service is rendered for more than a calendar year, the tax point occurs at the end of each calendar year.
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