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French tax authorities have published their guidelines on 5,5% VAT rate applicable to masks, protective suits and personal hygiene products adapted to the fight against covid-19

French tax authorities have published their guidelines on 5,5% VAT rate applicable to masks, protective suits and personal hygiene products adapted to the fight against covid-19 (BOI-TVA-LIQ-30-10-55-20200526). 

 

As a reminder, articles 5 and 6 of the 2nd Amending Finance Act for 2020 provides for the reduction of the VAT rate to 5.5% for transactions of masks, protective suits and personal hygiene products adapted to the fight against covid-19.  

Guidelines from the FTA, which had been published on May 26, 2020, specifies:

  1. The products covered by the 5.5% rate, which has been set out in the Order of May 7, 2020
  2. The application of the retroactive change of the VAT rate over time
  3. The regularisation of VAT

With regard to the first two points, the FTA guidelines remind the conditions of application of the 5.5% VAT rate set out in the Order of May 7, 2020 and gives some enlightenment for each type of masks as well as for personal hygiene products.

 

Categories of masks that could be eligible for the 5,5% VAT rate are sanitary mask, general public mask and masks that meet the standards of the French standardization agency (AFNOR).

 

Most significantly, the FTA guidelines specify the modalities of VAT regularisation as a result of the retroactive effect of the VAT rate and provide for a tolerance regarding VAT regularization for BtoB transactions.

 

Thus, the regularisation of output VAT, for BtoB transactions, may be carried out under the following conditions:

  • Reporting of the excess output VAT (20% rate) on the line 21 of French VAT return “autre TVA à déduire” by December 31, 2022 at the latest.
  • Issuing of a corrective invoice, at the latest on December 31, 2022, to the client. Moreover, this latter will have to collect the corresponding input VAT already deducted.

In case of B2C transactions, the output VAT collected at 20% can be recovered through the line 21 of the French VAT return. However, this regularization at the level of the supplier will not oblige him to issue corrective invoice or to pay the corresponding amount of VAT to the client. .

 

For the invoices issued between the date of entry into force of the law, i.e. March 1st, 2020 (for masks and protective clothing) or  March 24th, 2020 (for personal hygiene products), and  May 8th, 2020 (date of publication of the Order specifying the products eligible for the reduced VAT rate of 5.5%), by measure of tolerance, the FTA accept both parties may, by mutual agreement, agree that no VAT regularization will be made, without the administration being able to reassess the input VAT already deducted by the customer. The FTA guidelines do not provide any details on the format of this agreement. Nevertheless, we recommend obtaining this agreement in writing, since it may be necessary to have the proof of it. 

 

Nathalie Habibou, VAT Partner, Arsene Taxand

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