What is TVA？

The Value Added Tax (VAT), known as VAT, is one of the primary taxation systems in France and many countries worldwide. In France, VAT stands as a significant form of taxation, directly influencing the financial status of both businesses and consumers.

This article aims to delve into the concept of VAT in France, its operational methods, and the process of declaration.

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Basic Information on VAT

VAT is an indirect consumption tax levied based on the value added to goods and services. The taxpayers of VAT in France include both businesses and consumers. Businesses are required to pay VAT to the national tax authorities when selling goods or providing services, while consumers pay VAT when purchasing goods or enjoying services.

In France, businesses are obligated to declare VAT to the national tax authorities on a monthly or quarterly basis and pay the corresponding taxes. This necessitates accurate accounting records and declaration work by businesses to avoid tax irregularities.

Taxable operations under VAT include:

• Sales
• Service provision
• Purchases within the European Union
• Imports

Individuals engaging in such operations are VAT taxpayers.

According to the law, certain operations are exempt from VAT. For example, VAT exemptions include deliveries within the European Union, exports, certain banking or insurance activities, medical and healthcare services provided by medical professionals, education activities provided by schools, and continuing education activities provided by public institutions.

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VAT Taxation System

The VAT rates in France are divided into three levels: standard rate, intermediate rate, and reduced rate. The standard rate applies to most goods and services, the intermediate rate applies to specific goods, and the reduced rate applies to essential goods.

When establishing a business or company, the VAT taxation system (basic exemption, simplified taxation regime, actual normal taxation regime) should be chosen. Depending on the selection, the declaration obligations vary (semi-annual prepayments, monthly, quarterly, or annual declarations).

Note: Agricultural operators are subject to specific VAT taxation.

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1. Basic Exemption

1.1 Scope

This regime automatically applies to enterprises and companies whose turnover in the previous fiscal year does not exceed the following amounts:

• Sales of goods, items, supplies, and food for immediate consumption or consumption on-site, as well as accommodation supplies (excluding furniture rental, tourist furniture, rural lodgings, and family hotels), and
• €36,800 for service provision.

For new enterprises, there is no need to prorate turnover for the new fiscal year based on the operating period. Additionally, if the turnover does not exceed €101,000 or €39,100, the first year's turnover does not exceed €101,000 or €39,100, respectively, and the exemption is enjoyed. These amounts are the increasing limits of the basic exemption.

However, to determine whether the exemption applies in the first year after creation, the thresholds of €101,000 and €39,100 must be prorated based on the operating period of the creation year.

During the operating period, if the turnover for the current year exceeds €101,000 and €39,100 for sales and service provision, respectively, the basic exemption will cease to apply in the current year (from the first day of the first month in the current year exceeding these turnovers).

These thresholds apply to 2024 and 2025.

It is important to note that they are not linked to the thresholds of the micro-enterprise regime. Therefore, a company may be subject to the micro-enterprise regime in the BIC area and to the simplified taxation regime for VAT.

Certain professions enjoy specific thresholds: lawyers, authors, and artists.

In addition, certain activities do not benefit from the advantages of the basic exemption:

• Operations subject to the simplified agricultural taxation regime;
• Real estate transactions subject to VAT;
• Delivery of new means of transport within the European Union;
• Operations subject to VAT by option.

Companies subject to corporate income tax are not excluded from this regime. Therefore, when the turnover is below the threshold, companies can benefit from the basic exemption.

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1.2 Declaration Obligations

Professionals who enjoy the basic exemption and do not engage in import operations have no VAT declaration obligations. They are not required to submit declarations or go through VAT refund procedures.

Correspondingly, they cannot deduct VAT, nor do they charge any VAT. Their only obligation is to indicate "VAT not applicable, pursuant to Article 293B of t

he General Tax Code" on the invoices sent to clients.

Enterprises that do not wish to benefit from the basic exemption should inform their relevant tax authority (SIE). The VAT option must be sent to the SIE in writing; it takes effect on the first day of the declaration month, covering a two-year period, including the annual period in which the declaration month falls.

For more information, please refer to the "Useful Documents" on this page.

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2. Simplified Taxation Regime (RSI)

2.1 Scope

This regime applies to enterprises or companies that meet the following criteria:

• Not subject to the basic exemption (excluded under Article 293 C of the CGI);
• The turnover from the sale of goods, items, supplies, food for immediate consumption or consumption on-site (excluding furniture rental, tourist furniture, rural lodgings, and family hotels) is between €91,900 and €840,000, and the turnover from service provision is between €36,800 and €254,000 for the previous fiscal year. These thresholds apply to 2023, 2024, and 2025, excluding taxes;
• The due tax amount is less than €15,000;
• Opted for this regime upon creation or subsequently through their corporate tax authority (effective from the first day of the selection month).

Certain business operations are excluded from the simplified VAT taxation regime, including imports performed by enterprises or companies or certain real estate transactions subject to VAT.

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2.2 Declaration Obligations

Businesses must electronically submit two semi-annual prepayment notices (Form 3514) and make electronic payments, along with one annual adjustment declaration (Form 3517-S) at the end of each year.

Semi-annual PrepaymentsFrom the start of the business year, enterprises or companies must electronically transmit semi-annual prepayment notice forms. Regardless of whether the fiscal year is annual or deferred, the submission dates remain unchanged. A date is set for each year in July and December.

They can also view the prepayment amounts in their professional space through the "Declare VAT" service on the impots.gouv.fr website.

The prepayment amount for July should equal 55% of the VAT payable in the previous year, while the prepayment amount for December should equal 40% of the VAT payable in the previous year.

For new enterprises, it is not possible to determine the prepayments compared to the previous year's turnover based on the creation period. In such cases, prepayments are calculated as follows:

• The prepayment amount for July should equal 80% of the actual VAT payable in the previous period;
• The prepayment amount for December should equal 80% of the actual VAT payable in the previous period.

Annual VAT Adjustment DeclarationAt the end of the year, enterprises or companies subject to the simplified taxation regime must electronically transmit an annual VAT adjustment declaration and pay the VAT balance if necessary.

The deadline for filing the CA 12 declaration is as follows:

• If the fiscal year is one year (ending December 31 of year N), the annual adjustment declaration must be electronically transmitted before the second business day after May 1 of year N + 1 (Form 3517-S Model CA12);
• If the fiscal year is not one year, the annual adjustment declaration must be electronically transmitted within three months after the end of the fiscal year (Form 3517-S Model CA12-E).

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3. Actual Normal Taxation Regime (RN)

3.1 Scope

The actual normal taxation regime applies to the following enterprises or companies:

• Sales of goods, items, supplies, food for immediate consumption or consumption on-site (excluding furniture rental, tourist furniture, rural lodgings, and family hotels) exceed €840,000 (exclusive of tax), and service provision exceeds €254,000 (exclusive of tax);
• Enterprises or companies excluded under the law (RSI);
• Chose this regime upon creation and, in principle, applies to the basic exemption or RSI.

Entities under RN must pay VAT from the first day of their activities, starting with the first month based on their turnover (Form 3310 CA3).

If the annual net VAT is less than €4,000, enterprises can choose to submit VAT declarations quarterly.

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3.2 Declaration Obligations

Monthly or quarterly declarations (Form 3310-CA3) must be electronically transmitted in the month or quarter following the period concerned.

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4. VAT Refund

Forms 3310 CA3 or 3517 CA 12 (E) declarations may show VAT refunds. This occurs when the deductible VAT amount for a period exceeds the same VAT revenue for that period.

In this case, and subject to ensuring compliance with certain conditions, the amount can be requested for refund, even during the creation period. For this, it should be electronically transmitted via EFI or EDI modes:

• For actual normal taxation regime: VAT refund request (Form 3519), along with monthly or quarterly declarations (Form 3310 CA3)
• For simplified taxation regime: VAT refund request (Form 3517 DDR), along with annual declarations (Form 3517-S)

Note that for enterprises subject to the simplified taxation regime, it is possible to request a refund of VAT credits during the year, which arise from the purchase of items constituting fixed assets. When the purchase amount of tax is at least €760, it can be submitted electronically in July and December using Form 3514 (VAT prepayment notice) and Form 3519 (tax refund request).

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5. Specific VAT System for Agricultural Operators

Unified VAT Refund System for Agriculture

5.1 Scope

‍The right to benefit from this system depends on the following conditions:

• Not assuming the responsibility for paying VAT. Only agricultural operators eligible for benefits under their proprietary simplified regime or voluntarily chosen are eligible;
• Conducting sales or delivery operations related to products from their own farms for third-party sales or deliveries. Other activities carried out by farmers (services, methods, rents, etc.) do not qualify for the unified rate refund;
• Associated with the destination of the operation: Operations related to products (excluding slaughter and prepared animals) can receive a unified rate refund if these agricultural products are sold or delivered to the following destinations:
  • Companies in France that levy VAT on these same products. This condition excludes any sales to individuals (whether at markets or through agricultural operations) or to other farmers also engaged in agricultural operations;
  • Countries transported from EU member states;
  • Exported from countries outside the EU.

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5.2 Fixed Refund Rate

‍The refund of tax amounts is calculated by applying a percentage to the amount received by the operator from sales made during the year.This rate varies depending on the nature of the product:

• 5.59% for sales proceeds from milk, poultry, eggs, meat and prepared animals, cereals, oilseeds, and legumes;
• 4.43% for sales proceeds from other products.

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5.3 Tax Obligations

‍To obtain a fixed refund of taxes, agricultural operators must submit an annual declaration to the tax authorities summarizing the receipts from the previous year that are eligible for refund.

At the end of year N, the annual declaration (Form 3520) must be submitted electronically to the business tax authority (SIE) responsible for management before December 31 of year N + 1.

The following documents are no longer provided as attachments to the fixed tax refund application, but must be retained because the service agency responsible for reviewing your application may request them subsequently:

• Annual summary certificates provided by purchasers (taxpayers);
• Export certificates and invoice lists related to exports, involving the transportation of agricultural products to other EU member states.

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5.4 Option for Simplified Taxation System for AgricultureAgricultural operators automatically entitled to the unified refund system who wish to benefit from the simplified taxation system must choose it.

This choice is exercised by first fulfilling the declaration and settlement obligations required. It takes effect on the first day of the first three-year period it covers and is extended for a continuous period of five years at the end of that first period through tacit renewal.

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5.5 Simplified Agricultural Regime (RSA)

‍Agricultural operators whose average income over the past two calendar years exceeds €46,000 are automatically subject to the simplified agricultural regime for VAT from January 1 of the following year. The income used to assess the €46,000 threshold is net income.

The following cases are also subject to RSA, regardless of the annual income amount:

• Operators using commercial methods or industrial processes. These farmers sell original or processed agricultural products through salespersons, shops, or advertising means at fixed markets. For the sale of processed agricultural products, operators must use significant resources to conduct this activity, equivalent to industrial operations;
• Operators engaged in the purchase, import, community acquisition, sale, commission, and brokerage of slaughtering and prepared live animals.

Farmers not falling under the above cases are automatically included in the agricultural VAT fixed compensation system. However, they can choose to pay VAT, and thus, it depends on RSA.

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Note: This system contains specific provisions different from the ordinary regime. Therefore, the collection of taxes, i.e., the moment when the Ministry of Finance is entitled to claim its receivables from professionals, always consists of the collection of agricultural VAT prices.

The plan is based on installment payments and is regularized through an annual declaration at the end of the fiscal year. It has certain specificities.

Installment Payments

Payments are made quarterly. Regardless of the fiscal year's deadline, they must be submitted electronically using Form 3525bis (Due Date Single) and paid before May 5, August, November, and February.

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Whether you're a freelancer, startup, or established enterprise, Micco offers the tools and support needed to streamline financial operations and drive business growth. Check out Micco today to discover how it can complement your business banking needs.

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