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Value Added Tax in local language is "Taxe sur la valeur adjoute"

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):

  • Foodstuff
    20%, 10% or 5.5% depending on the item.
  • Water supplies
    5.5%
  • Pharmaceutical products
    5.5%, 10% and 20%*
  • Medical equipment for disabled persons
    5.5%
  • Children´s car seats
    20%
  • Passenger transport
    10%
  • Books
    5.5% and 20% (standard rated only if violent or pornographic content)
  • Books on other physical means of support
    5.5% and 20% (standard rated only if advertising or pornographic content)
  • Newspapers
    20%*
  • Periodicals
    20%*
  • Admission to cultural services (theatre, etc)
    5.5% and 20%
  • Admission to amusement parks
    10% and 20%
  • Pay TV / cable
    10%
  • TV licenses
    2.1%
  • Writers / composers
    5.5%
  • Hotel Accommodation
    10%
  • Restaurant and catering services
    10%
  • Restaurants
    10%
  • Admission to sporting events
    5.5%
  • Medical and dental care
    0%
  • Shoes and leather goods
    20%
  • Clothing and household linen
    20%
  •  Hairdressing
    20%

* 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 0% deductible in 2016 and 10% in 2017. VAT deduction allowance on petrol will increase gradually in the next years. See more information on expected VAT deduction on petrol expenses
  • Expenses on gas-fuel such as kerosene are 100% deductible
  • Business gifts are not deductible if the value exceeds €65

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.

French Statute of limitations

Input VAT should be claimed in a VAT return filed no later than the end of the third 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) in the website of the French tax authorities."

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 do not create a tax point on supplies of goods. They create a tax point on supplies of services
  • Intra-Community acquisitions: Tax point occurs when the goods enter France. An invoice must be issued by the 16th day of the following month
  • Intra-Community supplies: The tax point occurs when the title of the goods is passed to the customer. In case of a contract with a retention of title clause, the tax point occurs when the goods are put at the disposal of the customer
  • 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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