France VAT Guide: Rates, Rules, and Registration

As a cross-border seller, ensuring VAT compliance is paramount to building a successful business. Understanding VAT regulations and ensuring VAT compliance in France is essential for compliance and smooth operations, while non-compliance may lead to severe consequences.

In this article, we'll explore the key aspects of VAT in France, including rates, special schemes, and the process of registration. We'll also provide useful tips on how to navigate the complexities of French VAT laws to ensure your business stays compliant and avoids any potential pitfalls. Let's dive into the essential details of VAT in France!

What is VAT in France

VAT, or as it is known in France, Taxe sur la Valeur Ajoutée (TVA), was introduced in 1954. France was the first country in the EU to charge tax in such a way, followed by Germany. It is a value-added tax that is collected progressively at each step of production or distribution, based on the value added. Businesses must collect VAT on their taxable sales and remit it to the tax authorities.

For non-EU companies, to apply for VAT registration in France, you generally need to appoint a Fiscal Representative to handle VAT registration, filing, and payments.

France VAT Rates

Like most other countries in the EU charging VAT, France has fixed VAT rates on categories of products. There are 5 main types in this regard - standard, intermediate, reduced, super-reduced, and zero VAT. The table below outlines the VAT rates for various products and services in France:

>> Further Reading: Everything You Need to Know About VAT in Europe

VAT Special Schemes in France

Here is a list of the special schemes in France that allow businesses to have a smoother VAT experience. Unless mentioned, the schemes apply to both EU and Non-EU sellers:

• One-Stop Shop (OSS): Allows sellers to report and pay VAT in only one country instead of registering in multiple EU member states.
• Import One-Stop Shop (IOSS): Allows sellers importing goods worth less than €150 and selling them to EU customers to charge VAT at the point of sale.
• Distance Selling Thresholds: Exclusive to EU sellers - it is used for cross-border sales to consumers within the EU.
• VAT Margin Scheme: Exclusive to EU sellers - this is levied on second-hand items such as second-hand goods, art, antiques, and collectibles and is charged on the seller's profit.
• VAT Reverse Charge Mechanism: This applies to certain B2B transactions where the buyer is responsible for VAT instead of the seller.
• Tourism and Travel Special Scheme (TOMS): Applicable for businesses providing travel services. VAT is calculated only on the margin (profit) made from supplying travel services, reducing administrative burdens.
• VAT Exemption for Small Businesses: Small businesses that fall under the threshold for VAT are exempt from it. Applies only to EU businesses.

Who Needs to Register for VAT in France

Now, you must be wondering, "Do I need to register for VAT?" To answer your question, here is a brief list of cases where you should consider registering for VAT:

• For EU businesses, you must register for VAT in France if your taxable turnover exceeds the €10,000 threshold in the previous year or if you expect it to exceed this threshold in the current year.
• Non-EU businesses sell products stored in France to customers located in the EU or UK.
• Businesses participating in Amazon's Pan-European program must register for VAT, file returns, and pay taxes in France and six other countries.

How to Register for VAT France

Now that you have a clear understanding of VAT in France, let's take a look at how to apply for a VAT number in France. Here is a list of documents you must have to complete the procedure:

• Articles of Association
• Business License
• ID or passport
• Store link
• Store information to be filled in
• Signed and stamped authorization letter

Then, you'll need to apply through the official French tax website online and might have to translate some of the documents into French if they aren't already. Non-EU companies, usually also need to appoint a Fiscal Representative to handle the VAT registration and filings in France. The Fiscal Representative can complete the online submission on your behalf.

Once you have completed the application and it has been processed, it'll take anywhere between one to three months to receive your VAT number. Here is the France VAT number format: FR12 345678901. After receiving the VAT number, e-commerce sellers should upload the number into E-commerce platforms like Amazon's backend system.

How to Ensure VAT Compliance in France

Ensuring VAT compliance for sellers who want to expand into France is a key component to continue operations smoothly. Failing to comply with the France VAT rules or making incorrect declarations may result in financial penalties, sanctions, or trade bans entirely.

1. Accurately Calculate VAT in France

Maintaining precise accounting and staying compliant with France's VAT rules requires accurate VAT calculations. These factors play a role:

• Customs Duty = Declared Value of Goods × Product Customs Duty Rate
• Import VAT = (Declared Value of Goods + Freight Costs + Customs Duty) × 20% (Businesses can claim this as a deduction during quarterly reporting)
• Sales VAT = {Taxable Sales / (1 + Tax Rate)} × Tax Rate
• Actual VAT Payable = Sales VAT - Import VAT

Here's how to accurately calculate VAT in France using an example:

A foreign company plans to import a batch of goods worth €2,000 into a French FBA (fulfillment by Amazon) warehouse. The customs duty for this shipment is €340 (with negligible additional costs), and the VAT rate in France is 20%.

How much import VAT needs to be paid?

Answer:

(€2,000 + €340 + €0) * 20% = €468

(Calculation formula: Import VAT = (Customs duty paid value + Customs duty + Shipping cost) * VAT rate)

2. File VAT Return on Time

Your VAT returns need to be filed at regular intervals. To make things convenient, there are 2 different periods for which businesses can file their returns:

• Monthly: For most businesses, you'll have to declare your tax returns once every month and file them online, by the 24th of the following month.
• Quarterly: Businesses, that declared less than €4,000 in VAT the previous year, can declare your tax returns four times a year, by the 24th of the following month.

Important: If you go for online filings, the deadline can be extended to the 24th of the following month. For non-EU companies using a Fiscal Representative, the deadline may also be extended to the 24th of the following month.

For B2B transactions, you need to declare exchanges of goods, or DEB (déclaration d'échanges de biens), by the 10th of the month in France.

Filing your tax returns regularly, and before deadlines is essential to run a business smoothly. You should try your best to make the declaration before this date. You may be penalized harshly or sanctioned if found to be non-compliant.

3. Verify VAT Numbers Regularly

Doing business with a blocked or expired VAT number can be very problematic. It may result in bans from selling or buying completely, while also resulting in further legal complications. Therefore, you must keep verifying your VAT number regularly to prevent any unforeseen circumstances.

To check the validity of a Value Added Tax number, EU VIES, the French Tax Administration website, and the VATAi VAT number validation tool are trustworthy solutions.

Optimize VAT Compliance Process in France with VATAi

In this guide, we've delved into VAT in France, covering rates, registration rules, and the compliance process. Hopefully, you now feel more equipped to manage VAT in France. Registering for VAT in France is a must as an online seller, and should be the first thing you do before you start your business. However, the application process and declaration may be too much to handle alone.

VATAi can help you overcome this issue by serving as your trusted tax advisor for businesses in the EU and beyond.

• Automatically send reminders to help you file declarations on time every cycle.
• Utilize a smart system to calculate your VAT payable instantly and accurately.
• Seamlessly sync sales data from online platforms such as Amazon.
• Live chat is available for prompt support and quick follow-up.

If you are in need, get in touch with our team to see how VATAi can help right away!