VAT Tax in France: What you need to know as an online seller
France, a country with a diverse economy and a significant player on the international stage, also has a complex tax system, including Value Added Tax (VAT). For e-commerce entrepreneurs aiming to expand their business in the French market, understanding these regulations is crucial for success. Here are some key points regarding VAT in France that you should consider before starting your commercial activities.
VAT Rates in France
France applies five different VAT rates, depending on the type of goods or services.
20% – This is the standard VAT rate, applicable to most goods and services not covered by reduced rates.
10% – The first reduced rate applies to:
- Unprocessed agricultural products
- Renovation of housing raising standards
- Social housing
- Firewood
- Passenger transport
5.5% – The second reduced rate applies to:
- Food products
- Books
- Electricity
- Gas
2.1% – The third super-reduced rate applies to:
- Medicines covered by state refund
- Sale of live animals for slaughter
- Some cultural events
- Some press publications
0% – Zero VAT rate applies to intra-Community and international transport, except road and inland waterway transport.
VAT Registration in France for foreign companies
VAT registration in France is mandatory for companies outside the country that carry out taxable transactions there. It is advisable to register before commencing planned activities to avoid the risk of penalties and interest imposed by the tax authorities.
When is registration required?
VAT registration in France is necessary in the following cases:
- Exceeding the €10,000 threshold for distance selling without active VAT-OSS registration.
- Sale of goods from France to other European Union countries.
- Sale of goods to individuals through platforms such as Amazon or eBay with use of their warehouses (ex. FBA).
- Import of goods into France.
- Storage of goods in a warehouse in France.
- Organization of cultural events in France.
- Intra-Community supply of goods (ICS) and acquisition of goods (IAC).
Registration Process
If business activities have already commenced, it is essential to register for VAT as soon as possible and settle any outstanding periods. However, be prepared for interest charges by the administration and be aware that obtaining a French VAT number may take about three months.
VAT numbers in France – SIREN and SIRET
When a company intends to operate in France and obtains a VAT number, l’INSEE (National Institute of Statistics and Economic Studies) assigns two separate numbers: SIREN and SIRET. These serve as French business cards, identifying them in the registry. But what exactly is the difference between SIREN and SIRET?
SIREN vs. SIRET
Every French company is registered under a unique SIREN number, consisting of nine digits. This is the identifier for the main headquarters, identical to the RCS number (Trade and Companies Register), which can be found on commercial documents. This number is characteristic of the main headquarters and used for identification purposes.
In addition to the SIREN number, each company has at least one SIRET number for its main headquarters. If there are additional branches, the company receives a separate SIRET number for each of these branches. The SIRET number consists of fifteen digits, nine of which are the SIREN number, and the remaining five are the NIC (Internal Classification Number), indicating the geographical location of the company or branch.
French VAT invoice requirements
Issuing a VAT invoice in France is necessary upon delivery subject to taxation. It is also essential to keep these documents for a period of six years. Invoices should contain several key pieces of information to comply with legal and tax requirements:
- Date of issue: The day the invoice was issued.
- Unique number: Invoice identification number, allowing unambiguous identification of the document.
- Full addresses of the supplier and customer: Including the company name, address, and postal code.
- Supplier’s VAT number: Unique identification number of the supplier, enabling identification of the taxable entity.
- Details of the quantity of goods: Information on the quantity of goods or services provided.
- Unit prices: Unit price of the goods or services.
- Delivery date: If different from the invoice issuance date.
- Full description of the supplied services or goods: Detailed description of the goods or services covered by the invoice.
- Net value of taxable supply: Value of goods or services before taxation.
- Applied VAT rates: Information on the VAT rates applied to individual goods or services.
- VAT amount broken down by rates: VAT amount for each applied rate.
- Total gross invoice amount: Sum of net value and VAT.
In case of applying special provisions, such as the 0% VAT rate or reverse charge, relevant annotations should be included on the invoice, along with the numbers of the respective directives.
VAT settlements and declarations in France
After registering for VAT purposes in France, entrepreneurs must focus on regular settlements and VAT declarations, which are essential elements of conducting business in the country.
VAT returns in France depend on the type of activity carried out by foreign entrepreneurs or those based in other EU countries. It is also important to determine the amount of annual distance selling to other EU countries.
VAT taxpayers have the option to settle VAT monthly or quarterly, depending on the amount of their annual tax liability. If the annual liability does not exceed €4,000, settlements can be made quarterly.
The deadline for submitting VAT declarations in France is the 19th day of the month following the end of the settlement period. Additionally, French VAT declarations must be paid by direct debit, which is a standard practice in the country.
It is worth noting that VAT payers in France are not required to submit annual declarations, which may differ from procedures in other countries. This flexibility in the settlement system can be advantageous for entrepreneurs, allowing them to more precisely adapt to tax requirements. However, it is necessary to exercise caution and regularly monitor changes in tax regulations to avoid any unforeseen consequences: Contact us – amavat®.
Tax penalties and interest in France
French tax procedures are known for their conservative approach, meaning that late submission of tax declarations or payments often results in the imposition of interest and penalties by the French tax authorities.
Whether a company is based in France or not, failure to meet tax obligations can lead to the imposition of tax penalties by French authorities. Delays in tax payments or declarations can result in a financial penalty, increasing the liability by 10%. There is also a variation of this penalty, which amounts to 5% for property taxes on office, commercial, and warehouse properties.
Tax penalties in France:
- Late payment of VAT: A company that fails to settle VAT on time may face a penalty ranging from 5-10% of the tax amount.
- Late submission of VAT declarations: If a company fails to submit a declaration within the specified period (by the 19th day of the month following the settlement month), it may be subject to a penalty of €150 for each month of delay.
The situation becomes particularly challenging when companies realize they need to settle their tax arrears. This process requires retroactive VAT registration and settlement of all outstanding taxes to avoid additional penalties. In some cases, Polish tax authorities directly contact French authorities, informing them of the taxpayer’s outstanding obligations. This can lead to serious financial consequences for the company and even threaten its existence. Therefore, it is important for entrepreneurs conducting business in France to be aware of rigorous tax regulations and always strive to fulfill their tax obligations on time.
VAT refund
Entrepreneurs conducting business in France can apply for a VAT refund related to various expenses. To do this, they must complete the VAT-REF form and contact the relevant French tax authorities. However, it should be noted that companies registered for VAT settlements in France or those based there cannot apply for a VAT refund.
The minimum VAT amount qualifying for a refund is €760 or the equivalent in the national currency if the application covers a period from three months to less than one year.
Reverse charge in France
Reverse charge, also known as the reverse charge mechanism, applies when a supplier of goods or services, without a presence in France, sells goods to a company liable for VAT in this country. In such cases, the purchaser is responsible for settling the VAT, and the seller does not charge VAT on the sales invoice.
It is worth noting that it is not relevant whether the seller has a VAT number registered in France to use this settlement method. The reverse charge procedure applies to all supplies of goods and services in France, although there are some exceptions in B2B sales.
Summary
Understanding the complexities of the French VAT tax system can be key to success for e-commerce entrepreneurs. The article presents a comprehensive overview of rates, registration, VAT numbers, invoices, penalties and interest for late settlements, as well as procedures for VAT refund and reverse charge, providing essential knowledge for those planning to do business in the French market.
For any questions or additional information, we encourage you to contact our team of experts, ready to provide assistance and support: Contact us – amavat®.
Iga Turniak
