Country Guide - VAT in France

VAT in France - Three Types of Rates

There are three types of VAT rates in France:

1. Standard VAT rate,

2. Reduced VAT rates,

3. Zero VAT rate.

How much is VAT in France regions?

Apart from VAT rates in France's mainland, there are also special ones in France for specific regions. These special reduced VAT rates include:

• For Corsica: 

  • VAT rate 13% on oil products; 

  • VAT rate 10% on construction works, sales on farm machinery, sales on eaten-in products, etc.; 

  • VAT rate 2.1%, 

  • VAT rate 0.9% on sales of live animals to non-subjected to VAT entities and on the first performances or circus.

• In Martinique, Guadeloupe, and Réunion: 

  • the standard VAT rate is 8.5%, 

  • the reduced VAT rate is 2.1%, and 

  • the super-reduced VAT  rate is 1.05% (for the press).

VAT Registration Threshold 

The applicable tax norms concerning the registration procedure for all interested parties are found in the General Tax Code and accompanying indirect tax legislation.

There is no VAT France registration threshold for resident businesses, and likewise, there is no threshold for non-resident businesses. For intra-EU distance sales of goods and B2C supplies of services, there is a harmonized EU-wide threshold of EUR 10,000.

Furthermore, there is no VAT registration threshold for non-EU established suppliers of Electronically Supplied Services.

Types of Taxable Activities in France

According to French VAT law, a taxable person is a legal entity or individual who independently engages in economic activities, irrespective of purpose or outcome. 

Activities that may subject someone to France VAT include:

• providing taxable goods or services in return for payment, 

• making acquisitions within the EU, and

• importing and exporting goods.

VAT Registration Process 

A legal or natural person, whether domestic or foreign, should register if they provide taxable supplies of goods and/or services and cannot leverage the domestic SME scheme. 

French VAT Registration for Domestic Businesses

No minimum turnover threshold exempts a business from VAT registration in France. However, some businesses may be eligible for the Small Business Exemption (SBE) regime, which allows them to account for VAT.

French VAT Registration for Foreign Companies 

Foreign businesses that provide taxable supplies in France and are subject to VAT reporting and payment obligations or are required to register for VAT, such as imports, are subject to the exact registration requirements as residents. Therefore, all foreign businesses engaged in taxable transactions for which they are liable should typically register and report VAT.

It typically takes four to six weeks from the application submission to businesses' receipt of the French VAT registration certificate. Nonetheless, collecting the necessary documents and translating the articles of association might extend this timeframe.

Which information is needed to obtain a VAT France number?

The necessary form should be filled out and submitted to the French Tax Office along with the following documents: 

• A VAT certificate (if applicable) showing the business's registration in another EU country, 

• the articles of incorporation with specific provisions translated into French, 

• An original Power of Attorney, 

• A section of the company's national trade registry and 

• A copy of the legal representative's passport.

VAT Returns in France

Domestic taxpayers and foreign businesses operating under France's national VAT framework should file monthly or quarterly declarations.

The French General Tax Code outlines standard and simplified filing schemes with distinct deadlines. Additionally, taxpayers may opt for a seasonal filing scheme under certain conditions. In either case, all taxpayers should submit their French VAT returns and make VAT payments electronically.

Standard VAT Regime

Under the Standard VAT Regime, individuals or entities liable for VAT should file a monthly VAT France return using the CA3 form. 

A national calendar determines the filing date each month, considering taxpayers' names and registration numbers. Typically, this date falls between the 15th and 24th. This regime applies to those not qualifying for the Simplified VAT scheme. 

However, if the VAT due is less than EUR 4,000, taxpayers under the standard regime can file quarterly.

Seasonal Filing Regime

Businesses that meet specific criteria, such as non-profit entities, may be eligible for a seasonal filing system. Under this system, VAT returns are submitted only for the month's transactions.

Penalties for Failure to File Tax Return

In France, interest on overdue tax payments begins to accrue the day after the payment deadline. According to the French General Tax Code, the current interest rate is 0.2% monthly or 2.4% annually. The Code also outlines penalties for late submission of tax declarations, which vary depending on the situation:

• A 10% penalty applies if no formal notice is issued or the declaration is submitted within 30 days of receiving a formal notice,

• A 40% penalty is imposed if the declaration is not filed within 30 days of receiving a formal notice,

• An 80% penalty is applied in cases where undisclosed activities are found.

VAT Rules for Electronically Supplied Services 

Directive 2006/112/EC is a key element of the European Union's VAT system, particularly relevant for understanding Electronically Supplied Services (ESS). France has incorporated definitions related to ESS into its national VAT laws, reflecting the significance of digital commerce, which encompasses terms such as electronic services, digital services, or digital products. 

Taxability Rules for ESS:

The general place of supply rules applies for B2B transactions involving electronically supplied services, where the buyer is a legal entity. 

For B2C transactions, non-resident companies should adhere to EU-harmonized VAT rules, applying the VAT rate of the consumer’s residence. Non-EU suppliers should follow the EU rules for the place of supply without using the EUR 10,000 threshold. 

Regarding the rules applicable for EU suppliers of distance sales of goods and B2C ESS, if annual turnover is below EUR 10,000, they may apply their home country’s VAT rules or follow the OSS scheme. 

How much is VAT in France on ESS?

The France VAT rate for ESS is 20%.

E-Commerce Rules 

On July 1, 2021, EU regulators implemented significant updates to VAT regulations in response to the expanding digital economy. The reforms have two main objectives: 

1. To simplify cross-border business operations and 

2. To achieve uniformity in VAT rules related to e-commerce.

For cross-border sales of low-value goods, a consistent taxability framework was introduced for imports to EU customers from non-EU countries. The VAT rules for intra-EU distance sales were revised to streamline the process and enhance trade efficiency between EU Member States.

Domestic sales by deemed suppliers, where transactions occur within a single Member State, and B2C services provided by suppliers outside the customer's residence were also addressed. The VAT implications for these services have been clarified and streamlined.

The VAT Directive update, incorporating the E-commerce package, goes beyond these adjustments. It includes significant changes to simplified schemes and introduces the IOSS scheme, which is crucial for easing VAT compliance for cross-border e-commerce businesses.

The E-Commerce VAT package introduced three special schemes:

• Union Scheme,

• Non-Union Scheme,

• Import Scheme.

EU VAT Reporting 

Whenever goods are transported from a Member State to France or from France to another EU Member State, businesses should provide the Customs Authorities with detailed information about the cross-border movement of these goods.

From 1st January 2022, France's "Déclaration d’échanges de biens" (DEB), which previously combined the VAT recapitulative statement for goods and a statistical declaration, has been divided into two separate declarations:

1. EC Sales Lists and

2. The Intrastat survey.

EC Sales Lists 

Businesses should file monthly VAT recapitulative statements for intra-community goods transactions, known as the ESL, starting from the first transaction. This submission is specific to a reference month and is required for each declarant account. 

Instrastat 

Businesses that are VAT-registered in France and participate in intra-community trade should comply with this requirement if their annual turnover reaches EUR 460,000 in a calendar year. Intrastat returns should be submitted monthly, regardless of the VAT return's threshold or filing frequency.

Digital Reporting 

Local Businesses

There are two types of digital reporting that French businesses should comply with:

1. E-invoicing, and

2. SAF-T.

E-invoicing

As of January 1, 2020, all French companies should electronically submit their invoices to public sector entities (B2G).

In December 2023, the French National Assembly outlined the initial implementation dates, set for 2024, in an amendment to the 2024 Budget, as specified in Article 91:

1. By September 2026, all businesses should accept e-invoices, with B2B e-invoicing and e-reporting mandated for large and medium-sized companies. Extending this deadline by three months to December 2026 is an option.

2. Small businesses will need e-invoicing and e-reporting by September 2027, with a possible extension to December 2027.

SAF-T

French version of SAF-T is called FEC, shorter from Fichier d’Ecritures Comptables. Since January 1, 2014, taxpayers who use computerized systems for their accounting should provide their records in digital format during a tax audit.

Businesses should submit their accounting records file within 15 days of receiving the audit notification from the Tax Administration. If the FEC is not provided to the tax auditor, is incomplete, or does not meet regulatory standards, it may result in the rejection of all bookkeeping records and related returns and taxes, including VAT, financial statements, and corporate tax.