Following is a summary of the impact of French Budget Law on French VAT in 2016, and how it will affect companies with operations in the country over the next 12 months.
Reduced distance selling VAT registration threshold
France amended its Tax Code- art. 258B and lowered the distance selling VAT registration threshold from €100,000 to €35,000 (net from tax), from 1 January 2016. Distance selling of goods from another Member State of the European Union (EU), to France, will be subject to French VAT once the total amount of the sales to France exceed €35,000 excluding tax. Alternatively, a supplier can chose to impose French VAT on invoices within the EU from the first euro. With this new amendment to the French threshold, France is, henceforth, in harmony with most EU countries' distance selling thresholds.
VAT rate on sanitary products
Classified as essential products, a tax break has applied to transactions since 1 January 2016. VAT on tampons and sanitary towels dropped from 20% to 5.5%. This measure is not extended to sanitary products for the elderly. The change brings France broadly into line with the UK, where the charge on women's sanitary products is 5 per cent.
Combating tax structuring
All VAT registered businesses will be required to use certified accounting software that fulfils conditions of inalterability, security, storage and archiving. There will be stricter enforcement mechanisms on the use of sales tracking software. Companies must be able to provide the tax administration with a certificate approved by a third party with the authority to conduct certification audits at a high security level, or a certificate from the software publisher.
A transitional period of two years is permitted for businesses to make necessary changes to their systems and accounting practices. From 1 January 2018, penalties of €7,500 will apply and businesses will have the obligation to comply within 60 days.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.