VAT registrations and simplications in France
When do I need a French VAT number?
As a general rule, a foreign non-established business must register for VAT in France as soon as a taxable supply is made. The following are some usual examples of taxable transactions:
- Domestic supply of goods not reverse charged: A supply of goods located in France to a French customer where the supply is not subject to reverse charge requires a VAT registration of the supplier.
- Supply of services not reverse charged: Foreign non-established businesses supplying services on which French VAT is due must register for VAT. These services are rather exceptional, as the general B2B rule would apply.
- Export: Exporting goods to a non-EU country requires a VAT number before the export is made.
- Intra-Community acquisition: Acquiring goods from another Member State where all conditions for intra-Community movements are met requires the customer to register for VAT.
- Intra-Community supply: Supplying goods another Member State is also a taxable transaction that obliges the supplier to register for VAT
- Distance sales above the threshold also require a VAT number. See French distance sales rules for more information.
A voluntary registration is not possible in France. This is, companies cannot register if they have not made a taxable transaction.
There is no registration threshold for non-established companies in France. Any company without a PE that performs taxable transactions should register for VAT.
Fiscal representative requirements in France
Non-EU businesses must appoint a French fiscal representative when registering for VAT purposes in France. The fiscal representative is jointly and severally liable for the tax liabilities of the company. After Brexit in 2021, UK companies are not required to appoint a fiscal representative for VAT purposes in France.
Businesses from other countries with whom France signed an agreement for mutual assistance also do not need a fiscal representative. The full list of countries who do not require a fiscal representative is published on this page from the French authorities.
EU businesses must register directly for VAT purposes. This means that the legal representative of the company signs the registration form without any local French involvement. Companies registered directly in France can appoint and agent to take care of their VAT obligations. This agent (so called "mandataire fiscal") is not jointly and severally liable for the tax liabilities of the business.
French VAT groups
There is only an administrative simplification for VAT groups in France. VAT groups are not treated as a single taxable person and intra-group supplies are not disregarded. The Finance Bill for 2021 stated that as of January 2023, VAT groups may be considered as a single taxable person. Until then, each individual entity has its own VAT obligations, and they need to file their own VAT return and issue invoices from their VAT number. However, all VAT due can be consolidated into a single payment, allowing for cash flow advantage for groups of companies. In addition to each member's VAT return, the head of the group will file a monthly VAT return consolidating the VAT position of all members and calculating the resulting total VAT position of the group.
Permanent establishments may be part of the VAT group. Regarding liabilities, although the payment is made by the head of the group, each entity is jointly liable for the VAT payment.
The following conditions must be met in order to create a VAT group:
- The head of the group must hold at least 50% control of each member.
- Accounting periods of all group members must be the same. Also, the VAT regime should be the same and they all need to file monthly VAT returns.
- Creating a VAT group requires an application by the head of the group once each member has given written consent to be part of the group.
- Each group member files Corporate Tax returns electronically to the Department for large businesses in France (turnover exceeding €400,000,000).
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French consignment or call-off stock
The EU introduced a call-off stock simplification that all EU Member States must implement. This was put into place so that businesses that operate under a consignment stock structure do not have to VAT register in the country of destination.
Previously, France allowed a consignment stock simplification when the applicable conditions are met.
Normally, an intra-Community acquisition followed by a local sale requires a VAT registration. However, where a) these goods are stored for less than 3 months and b) the parties have a written consignment agreement in place, the VAT registration can be avoided.
For example, if a jewelry business moves stock from another EU country to a warehouse location in France, a VAT registration is not required provided these goods stay for less than 3 months in the warehouse and the parties have reached a consignment agreement. The customer will therefore make an intra-Community acquisition when the goods are withdrawn from the warehouse. This customer should also report the purchase in the "Déclaration d´Echanges de Biens"."
Bad debt relief in France
Bad debt is allowed in France. A business can claim VAT back when this amount has not been collected from the customer. The condition is however that the supplier has exhausted all legal remedies to get the invoice paid. In practice, bad debt would be allowed when the invoice has been written off and legal actions have been taken.
Regarding formalities, the business must send the customer a copy of the relevant invoice with the following wording: "facture demeurée impayée pour la somme de €… (net amount) et pour la some de €… (VAT amount) qui ne peut faire l´objet d´une déduction (article 272 Code Général des Impots)"
This VAT will only be deducted by the end of the second year following the year in which the debt became irrecoverable. The corrected amounts are reported in box 21 of the return.
More information (in French) can be found here.
French import VAT deferral and postponed import VAT accounting
Normally, import VAT is paid upon arrival of the goods. However, to compensate for the cash flow disadvantages of these rules, most countries allow simplification where this VAT is either paid at a later stage (so called "import VAT deferral allowance") or import VAT is reverse charged in the next VAT return of the business importing the goods. This system is usually referred as "postponed import VAT accounting". France introduced an automatic and mandatory application of postponed import VAT accounting, hence allowing reverse charge on all imports made by those taxpayers with a French VAT number.
French Postponed import VAT accounting
In France, it is not necessary to make any specific request or meet any requirements in order to apply import VAT reverse charge. The VAT returns will be pre-filled with the import VAT declared at Customs.
French tax authorities will pre-complete import VAT amounts as due and deductible (reverse charge) in VAT returns, so that taxpayers can review those amounts that are automatically populated before proceeding with submission of the VAT returns.
For more information on this update, please refer to the article published in this website.
Customs (bonded) warehouse and VAT warehouse in France
Customs or bonded warehouse is available for goods that have not cleared customs in the EU (T1). VAT and excise duties are not due when these goods are directly placed in the Customs warehouse. As soon as they exit this regime, these amounts are due. Sales within the customs warehouse are zero rated. This regime is only available for EU based companies. An application needs to be submitted to the Customs authorities and, once approved, taxpayers should issue invoices for sales under Customs warehouse regime with a reference to the authorization number received and the name of the Customs warehouse.
VAT warehouse is available for cleared goods (T2). These goods have already paid customs duties. The conditions are similar to those of Customs warehouses. Limit fiscal representation may be used on VAT warehouse transactions. Also, the warehouse keeper is liable to record all movement within the VAT warehouse.
French cash accounting
Taxable persons that do not make any intra-Community supplies or whose annual turnover is less than EUR 300,000 (when intra-Community supplies are made) are able to participate in the cash accounting scheme in France. Under this scheme, VAT is due on the goods or services supplied when the payment or partial payment by the customer is received.