For purposes of the imposition of VAT, France includes metropolitan France, Monaco, and the continental shelf and territorial waters. The Overseas Departments and Regions are treated as foreign countries, and such jurisdictions have their own VAT, which is imposed within their own territorial limits. The territorial application of VAT is different for the two major categories of taxable economic activities, viz. the supply of goods and the rendering of services.

As a general rule, VAT is imposed on all taxable economic activities conducted or, in specific cases, used in France at a rate of 20%. Certain supplies are subject to reduced rates of 10%, 5%, and 2.1% or are either zero-rated or exempt.

Reduced Rate of 10% Supplies Include:

Medicines;
Domestic passenger transport;
Hotel accommodation;
Restaurant service; and
Inland waterways transport.

Reduced Rate of 5.5% Supplies Include:

Food products;
Gas and electricity;
Books (other than e-books);
Teaching and practicing horse riding including access to related sports facilities;
Medical equipment to disabled persons; and
Water supplies.

Reduced Rate of 2.1% Supplies Include:

Certain pharmaceutical products;
Newspapers and periodicals; and
Digital media broadcasters and distributors, including streaming and downloadable video-on-demand operators.

Zero-Rated Supplies Include:

Intra-community and international transport (excluding road and inland waterways);
Specified financial transactions; and
Export of goods outside the EU and related services.

Exempt Supplies Include:

Land under specific conditions;
Financial transactions;
Special Investment Funds (SIFs) subject to conditions;
Buildings completed for more than five years;
Insurance;
Education;
Health and welfare; and
Betting and gaming.

Registration Threshold

The following thresholds apply to French-established businesses effective 1 January 2024:

EUR 85,800 during the previous year for the sale of goods (or EUR 93,500 in the current year); and
EUR 37,500 during the previous year for the supply of services other than sales for consumption on site and accommodation services (or EUR 41,250 in the current year).

Non-resident entities subject to VAT are required to register for VAT irrespective of the turnover threshold, except when the supplies are subject to reverse charge.

Small businesses established in other EU Member States can request a VAT exemption in France according to the above thresholds if their annual turnover in the EU does not exceed EUR 100,000 and, likewise, small businesses established in France can request an exemption in other EU Member States if their annual turnover in the EU does not exceed EUR 100,000.

Group Regime

France has announced the implementation of the VAT group regime effective 1 January 2022. Under the VAT group regime, two or more taxable persons who are closely linked financially, economically, and organizationally, having a place of residence in France and conducting an economic activity can apply for forming a VAT group. When opted for, the VAT group regime is required to be applied for a minimum of 3 years, with one group member designated as the group representative to fulfill all obligations related to VAT and make payment for which they remain jointly and severally liable. The supply of goods or the provision of service carried out by the members of the group are deemed, for VAT purposes, to be carried out by the group. Likewise, transactions carried out for the benefit of a member are deemed to be intended for the group. Transactions between members of a VAT group are essentially treated as non-existent for VAT purposes.

Returns and Payments

Taxpayers are required to submit monthly, quarterly, or annual VAT returns depending on their taxable turnover. Monthly VAT returns are required to be filed by taxpayers where:

The turnover exceeds EUR 818,000 for goods or EUR 247,000 for services; and
The output tax due exceeded EUR 15,000 for the preceding year.

Quarterly or annual VAT returns are required to be filed by taxpayers where:

The turnover is between EUR 85,800 and EUR 818,000 for goods and between EUR 34,400 and EUR 247,000 for services, and the output tax due in the previous year was less than EUR 15,000; or
The turnover exceeds EUR 818,000 for goods or EUR 247,000 for services, and the output tax due during the previous calendar year did not exceed EUR 15,000.

No VAT returns are required to be filed by taxpayers whose turnover is less than EUR 85,800 for goods or EUR 34,400 for services.

VAT payment by resident taxpayers and non-residents established in non-EU countries is required to be made between the 15th and 24th day of the month following the end of the return period. The due date is dependent on several factors, including the type of legal entity involved and the location of the taxable person. For EU taxpayers, VAT payment is required to be made by the 19th day of the month following the end of the return period.

Digital Supplies

VAT on Distance/Electronic Sale of Goods

Effective 1 July 2021, France implemented the new EU VAT rules for e-commerce transactions for supplies made to non-taxable persons. The following are the key changes under the new rules:

The distance sales threshold of EUR 35,000 (applicable until 30 June 2021) is abolished and the destination principle for distance sales of goods applies instead. Thus, supplies are subject to VAT in the Member State of the recipient, regardless of the supplier’s distance sales volume;
In order to reduce the administrative burden on smaller businesses, a simplification option is introduced for smaller businesses with annual sales not exceeding EUR 10,000, which allows the accounting of VAT according to local rules. Hence, the VAT is collected in the Member State where the seller is established or where transportation starts;
A One Stop Shop system (OSS) is introduced for domestic sale of certain goods and intra-EU distance sales of goods to customers within the EU. Under the OSS, an opportunity is given to the taxpayer to register in one EU Member State (referred to as the Member State of Identification) and report all sales to customers across the EU in a single, consolidated VAT return. The VAT on consignments imported from outside the EU with a value not exceeding EUR 150 can be reported through a new special scheme viz. Import One Stop Shop (IOSS); and
For goods imported from outside the EU, the current import exemption for low value goods (below EUR 22) ceases to apply. Therefore, VAT at the appropriate rate becomes due on such imports in the EU.

VAT on Electronic Supply of Services

As per the place of supply rules, electronically supplied services, telecommunications, and broadcasting services to consumers located in the EU Member States are, in general, taxable at the customer’s location irrespective of whether the customer is a taxable person (B2B) or a consumer (B2C). As an exception to this rule, effective 1 January 2019, electronic services provided to a non-taxable person (B2C) are taxable at the location of the supplier, provided the total amount of consideration received for the relevant services does not exceed EUR 10,000. Effective 1 July 2021, under new EU VAT rules for e-commerce transactions, the OSS is introduced wherein an opportunity is given to the taxpayer to register in one EU Member State (referred to as the Member State of Identification) and report all sales to customers across the EU in a single, consolidated VAT return. The following schemes are available within the OSS:

The non-Union scheme for taxable persons that have no establishment within the EU; and
The Union scheme for taxable persons that have an establishment within the EU (but are making supplies to Member States in which they are not established).

Until 30 June 2021, taxpayers could opt for the use of the Mini One Stop Shop (MOSS) for supply of telecommunication, broadcasting and electronic services in order to minimize their tax compliance burden.

Electronic Invoicing

All taxable persons are obliged to receive electronic invoices from 1 September 2026. The issue of electronic invoicing is mandatory in France based on the following schedule:

Effective 1 September 2026 - for large companies and medium sized companies; and
Effective 1 September 2027 - for small and medium-sized entities (SMEs) and micro-enterprises.

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