Contribution by Nathalie Habibou, Partner – Arsene Taxand – Link including X-references to other documents
The VAT agenda has been particularly busy in France this year, despite the unusual circumstances due to the Covid-19 crisis. We have listed below the most significant topics for the first half of 2020.
Top 1: Implementation of the Council Directive (EU) 2018/1910 of December 4th, 2018 “Quick Fixes”
The financial act for 2020 (Loi n° 2019-1479 du 28 décembre 2019 de finances pour 2020) implemented the four transitional measures called “quick fixes”. These measures came into force in France on January 1st, 2020.
As a reminder, the purposes of these “quick fixes” measures are to:
– strengthen the basic conditions for exemption from VAT on intra-Community supplies of goods.
– strengthen evidence of intra-Community transport of goods.
– simplify the VAT treatment applicable to stocks on deposit/consignment.
– standardise the rules on chain transactions.
Following this entry into force, the French tax authorities’ guidelines are expected to be published in the coming months. More details on this topic are available on this article “Quick Fixes” TVA : 6 mois pour se mettre en conformité
Top 2: Implementation of e-invoicing in BtoB relations
Article 153 of the financial act for 2020 provides that invoices issued in B2B relations will have to be issued in electronic format and the data contained therein transmitted to the administration for processing to modernise VAT control procedures.
These obligations are intended to make it possible to avoid VAT fraud more effectively by allowing the tax authorities to carry out automatic cross-checks.
The scope of these measures should cover domestic transactions invoiced under the vendor’s French VAT number, but this point still needs to be clarified.
The implementation of these measures is foreseen at the earliest by January 1, 2023 and at the latest by January 1, 2025, depending on the sector of activity and the size of the businesses concerned. More details on this topic are available on Vatupdate – Update E-invoicing /E- Reporting in France
Top 3: VAT rate reduction on certain products needed for the fight against Covid-19
In the frame of the Covid-19 crisis in France, the French tax authorities took measures in order to decrease VAT rates on certain Covid-19 related products.
These VAT reduction are applicable to the period from March 24th, 2020 to December 31st, 2021 for masks and protective clothing suitable for combating the covid-19 and from March 1st, 2020 to December 31st, 2021 for products intended for personal hygiene and adapted to the fight against the covid-19. Further details on these measures to be found on this article New measures : VAT rate reduction on certain products needed for the fight against Covid-19
Top 4: Exemption from regularisation of the VAT deducted on donations of health equipment
To address the covid-19 crisis, the French tax authorities issued a ruling dated April 7th 2020 (BOI-RES-000068) that extend the exemption of VAT regularisation for donations of unsold foodstuffs to donations of health equipment during the state of health emergency period.
The exemption is applicable to donations of masks, hydro-alcoholic gels, protective clothing and respirators manufactured, purchased or imported by companies, for the benefit of: health care institutions ; institutions for the care of dependent elderly persons institutions and services for the care of the disabled etc.
Top 5: Application of the VAT margin scheme on immovable property (real estate)
In a recent decision of March 27th, 2020, the French Administrative Supreme Court (Conseil d’Etat) ruled on the application of the VAT margin scheme within the sale of immovable property.
The VAT margin scheme on immovable property is subject to a wide range of interpretation in France between Courts and French Tax Authorities’ guidelines.
For the application of this scheme, the French Tax Authorities guidelines require that the immovable property being sold, and the property purchased must be identical from a legal and physical point of view.
This restrictive position of the tax authorities has been criticized by several local Courts decisions considering that the tax authorities added a condition not foreseen by the law. Indeed, since the law provide only a condition related to the absence of VAT deduction at the time of the acquisition.
In this case, the Supreme Court confirmed the French Tax authorities’ guidelines that applies the VAT margin scheme only if the property acquired and the property sold are identical (Conseil d’Etat, March 27th, 2020, N°428234).
However, the debate is not yet over, since in a recent case of June 25th, 2020, the same Administrative Supreme Court requested an ECJ preliminary ruling on the condition of application of the VAT margin scheme on immovable properties ( Conseil d’Etat, June 25th, 2020, N° 416727)
Other hot VAT topics to be followed in France in 2020
– E-commerce: Implementation of the directive reforming the VAT regime for e-commerce (Directive 2017/2455 of December 5th 2017 and Directive 2019/1995 of November 21st, 2019) by the financial act for 2020 (Article 147 – Loi n° 2019-1479 du 28 décembre 2019 de finances pour 2020).
– Introduction of the VAT group scheme, pursuant to article 11 of the VAT directive (Directive 2006/112/EC). This measure is expected to be adopted by the French parliament in the financial act for 2021.
Nathalie Habibou, Partner – Arsene Taxand
