The generic terms “grants” and “allowances” usually designate sums of various kinds which do not all follow the same regime with regard to value added tax (VAT).

In fact, the taxable nature of subsidies and indemnities results, on a case-by-case basis, from the analysis of the intention of the parties, the circumstances, their method of calculation and their terms of payment. This involves determining whether or not the sums received or to be received constitute direct consideration for the provision of services or the delivery of individualized goods.

I. Public subsidies, aid between companies and donations

European or national case law relating to the direct link leads to specifying the rules applicable in this area.

Thus, when an organization is financed by sums qualified as aid, subsidies, waivers of debts or donations, it is advisable to seek successively:

if the sums paid constitute in fact the counterpart of a transaction carried out for the benefit of the paying party;

If so, the term subsidies is a misnomer. It is indeed the price paid for a service rendered or for the delivery of goods. This transaction falls within the scope of VAT and the “subsidy” is taxable, unless the transaction benefits from an exemption. This principle applies regardless of the status of the paying party (person governed by public or private law) or the name given to the sums (subsidies, budget credits, aid, debt waivers, donations).

failing that, if the sums paid complete the price of a taxable transaction.

They are subject to VAT if they constitute the complement of the price of taxable transactions. They must then be included in the VAT tax base and be taxed, unless the operation benefits from an exemption. If the sum does not constitute consideration for an operation carried out for the benefit of the paying party, nor the supplement to the price of an operation carried out for the benefit of a third party, the subsidy, aid or donation is not taxable with VAT.

A. Public subsidies, aid between companies and donations included in the tax base

1. Public subsidies

These are subsidies paid by the State or public authorities (local authorities, public establishments, etc.).

has. Subsidies that constitute consideration for a service rendered

When the legal or factual circumstances make it possible to establish the existence of a commitment to provide a specific good or service or to note the fulfillment of such a commitment by the beneficiary of the subsidy, the sums paid constitute the counterpart of a supply of services or the supply of goods falling within the scope of VAT.

It is therefore necessary to determine in each situation whether the subsidy is not in fact the price of a direct service rendered or the supply of goods.

Thus, the Council of State ruled that the carrying out by an organization of a study for the benefit of a public authority for a specific remuneration is an operation subject to VAT ( EC, decision of July 6, 1990, n° 88224, CODIAC ).

Similarly, sums paid by a local authority to a local radio station in return for various contractual obligations (information on local life, news bulletins, etc.) or sums paid by a municipality to a company are subject to VAT. in charge of topographic surveys.

When grants or similar payments actually constitute consideration for the supply of goods or services, it is not possible to distinguish among the sums received the part that would be allocated to investment expenditure. The solutions relating to equipment subsidies apply only to real subsidies, that is to say those which are not the consideration for the delivery of goods or the provision of services provided to the grantmaker.

b. Complementary subsidies

1° Definition of additional price subsidies

Pursuant to Article 266 of the CGI , transposing Article 73 of Council Directive 2006/112/EC of 26 November 2006 relating to the common system of value added tax, the tax base is made up in particular of subsidies directly linked to the prices of taxable transactions.

To be qualified as a “subsidy directly linked to the price”, a subsidy must meet the cumulative conditions set out in IA-1-b-1° § 70 to 90 (judgments of the Court of Justice of the European Communities handed down on November 22, 2001 in the case C-184/00 “Office des produits wallons ASBL”, ECLI:EU:C:2001:629 and on 15 July 2004 in case C-495/01 “Commission v/ Republic of Finland”, ECLI:EU: C:2004:442 , C-144/02 “Commission v/ Federal Republic of Germany”, ECLI:EU:C:2004:444 and C-463/02 “Commission v/ Kingdom of Sweden]”, ECLI:EU :C:2004:455 ).

a° The subsidy is paid by a third party to the party carrying out the delivery or service

A price supplement subsidy necessarily involves the presence of three parties: the person who grants the subsidy, the person who receives it and the buyer or the taker.

Consequently, internal financial transfers observed between different budgets of the State, local authorities or public establishments do not meet the definition of subsidies when they are not paid by a person other than the beneficiary. These accounting movements should therefore not be subject to VAT.

b° It constitutes the total or partial counterpart

The principle of the payment of the subsidy must exist in law or in fact before the intervention of the event giving rise to the operation for which it constitutes consideration. In addition, the price of the good or service must be determined, as to its principle, at the latest when the triggering event of this operation occurs. There must be a relationship between the decision of the paying party to grant the subsidy and the reduction in the price charged by the beneficiary. The subsidy must be paid specifically to the subsidized organization so that it delivers goods or renders a specific service. It must therefore be identifiable as consideration for a taxable transaction and not paid globally to cover the costs of the subsidized organization (it is not enough that its payment indirectly enable this organization to charge lower prices). This relationship, which results from the intention of the parties, must appear unequivocally following a case-by-case analysis of the circumstances which gave rise to the payment of this subsidy.

The purchasers of the good or the recipients of the service must benefit from the subsidy granted to the beneficiary. In fact, the price to be paid by the buyer or the lessee must be fixed in such a way that it decreases in proportion to the subsidy granted to the seller, which then constitutes an element in determining the price demanded. Thus, a subsidy cannot be qualified as a price supplement when it is not calculated in such a way as to specifically cover the shortfall in revenue resulting from the pricing, but its purpose is to bear the costs fixed and/or variable.

c° It allows the customer to pay a price lower than the market price or, failing that, the cost price

The notion of subsidy directly linked to the price of taxable transactions must apply strictly. The taxation of subsidies must not lead to an overtaxation of the operation, in particular when the beneficiary of the subsidy does not charge, in the end, a price lower than the market price.

The market price is the total amount that a buyer or lessee, being at the marketing stage where the transaction is carried out, should pay, at the time when the transaction is carried out and under arm’s length conditions, at a supplier or independent contractor to obtain the same goods or services. When there are no elements of comparison to establish the existence of such a price, it must be understood as the cost price of the goods or the service.

When these three conditions are met, the grants are subject to the tax rules (rate, exemption, etc.) applicable to the transactions for which they supplement the price. These sums, which do not constitute consideration for a taxable transaction for the paying party, do not give the latter any right to deduct the related VAT.

2° Application

100

In light of the criteria defined in IA-1-b-1° § 70 to 90 , the following subsidies constitute subsidies directly linked to the price of taxable transactions:

sums paid to a research organization subject to VAT in addition to the receipts relating to the research services it provides for the benefit of a company and contractually intended to lower the price of these services below their market price;
subsidies paid to a show organizer so that the latter reduces, below the market price, the prices it charges to the public and this, in relation to the amount of the subsidies granted.

110

With regard to subsidies granted by local authorities to encourage the establishment of a business, by a decision of January 27, 2010 ( CE, decision of January 27, 2010, no. 299113, SARL Les Jardins de Beauce ), the Conseil of State ruled that, taking into account the purpose of the operation as a whole, the subsidies granted by public bodies for the purpose of obtaining a reduction of an equal amount of the rent charged to a company in order to to promote its establishment were, whatever their terms of payment, directly linked to the price of subletting the building within the meaning of 1 of article 266 of the general tax code and were, therefore, taxable at VAT.

Note: In this case, the subsidies had been allocated to real estate companies for trade and industry (SICOMI), which had undertaken to pay them back, in the form of credit notes or retrocessions, to the SARL Les jardins de Beauce, which had itself undertaken to pass them on to the rent invoiced to SA Muller Bem. The Council of State considered that it resulted from the commitments made by the various stakeholders at each stage of the complex system put in place that the payment authorities actually granted the subsidies in dispute to the SARL Les jardins de Beauce so that the latter affects the amount of rent invoiced.

120

Subsidies paid by the family allowance fund (CAF) for the benefit of an early childhood childcare structure managed by profit-making companies are analyzed as a price supplement, and must therefore be subject to VAT, from when the agreement concluded between the CAF and the childcare center managed by for-profit companies requires the establishment to apply the scale of family contributions established by the National Family Allowance Fund (CNAF) and in the extent to which the amount of the subsidy comes in addition to the family contribution.

2. Aid between companies

130

The rules described in IA-2 § 140 to 160 apply to all aid paid by one company to another company, regardless of its form and name: subsidies, debt waivers, donations, etc.

140

The procedure to follow is as follows. First, it is necessary to find out whether there is an individualized and precise provision of services rendered by the beneficiary to the company which granted the aid.

The existence of an individualized benefit results from the existence of commitments made by the beneficiary of the aid.

Thus, the following do not constitute remuneration for the provision of services:

a subsidy paid to a sister company in difficulty when this subsidy does not remunerate the provision of services for consideration, even if the paying company had an inherent commercial interest in preserving the activities of the sister ( CAA Paris, judgment of February 21, 1991, No. 89PA02606, SECIP );
subsidies paid by a parent company to one of the subsidiaries to enable the latter to finance the redundancy plan for part of its personnel ( CAA Paris, judgment of March 18, 1993, no. 91PA01158, SA Société d Balzac Châteaubriant administration );
subsidies paid by members of a general partnership responsible for marketing the wine products of its members to balance its accounts when they do not correspond to the supply of individualized services for the benefit of each of the partners and have the sole purpose of ensuring the balance of the social accounts ( CAA Bordeaux, rulings of November 2, 1993, No. 92BX0164, Crus et Domaines de France ).

150

In the absence of individualized service, it should then be determined whether the aid constitutes a price supplement to be included in the tax base in accordance with the provisions of a of 1 of article 266 of the CGI .

160

If the aid does not remunerate an individualized operation and does not constitute the price supplement for a taxable operation, it is analyzed as a non-taxable subsidy.

3. Donations

170

Donations are subject to the same VAT rules as grants. Sums qualified as donations are thus taxable for VAT when they actually remunerate a service. This is the case of sums paid in return for an advertising or sponsorship service, such as “donations” in cash or in kind paid in connection with the sponsorship of athletes who undertake in return to fulfill certain obligations (use a name, a company name, certain equipment, etc.).

B. Public subsidies, aid between companies and donations excluded from the tax base

180

Public subsidies, aid between companies and donations which do not constitute consideration or the payment of which does not have a direct and immediate link with the price of the delivery of goods or the provision of services, within the meaning of the criteria described in I § 10 , should not be subject to VAT, even if economically they participate indirectly in price formation.

Thus, the mere fact that a subsidy may have an influence on the price of goods delivered or services provided by the subsidized organization is not sufficient to make this subsidy taxable.

190

It is therefore necessary to verify in each situation that the subsidy is not the price of a direct service rendered. Such would be the case (absence of direct service rendered):

global grants paid by a city and a chamber of commerce on the basis of the “general perspectives for action” of an organization which, with the aim of promoting the economic expansion of a region, carries out studies, informs and advises municipalities and businesses in this region ( EC, decision of July 6, 1990, no. 88224, CODIAC );

Note: Thus, the financing of an organization (notably an association) solely in view of the general goals it has set itself or which it undertakes to satisfy does not constitute consideration for the provision of services which would be returned to the local community. Similarly, the requirement of reporting on the use of public funds does not, in itself, characterize the existence of a provision of services.

subsidies paid by a municipality to a Chamber of Commerce and Industry (CCI) to enable it to meet the repayment deadlines for the loans it has contracted for the construction of an airport and which do not give rise to individualized services for the benefit of the paying community since the CCI had not subscribed in return for these subsidies to any obligation with regard to the nature of the services offered ( CE, decision of July 10, 1991, n° 61575, CCI of Perpignan );
the subsidy paid by a municipality to an organizer of trade fairs in the municipality when the beneficiary has not subscribed to any obligation in return for these subsidies ( CE, decision of July 8, 1992, no. 80731, Midem organisation ).

200

In particular, the following are not included in the tax base:

equipment grants allocated to the total or partial financing of a specific investment good;
so-called “purchase” subsidies, intended to financially cover the purchase by the beneficiary of specific goods or services from another taxable person (example: State subsidies paid to companies as part of employment, settling in certain underprivileged areas, “advice checks”, etc. );
so-called operating subsidies, intended to cover only part of the operating costs of an organization. Although these sums often have an influence on the cost price of the goods delivered and the services provided by the subsidized body, they do not necessarily constitute subsidies directly linked to the price of these operations (for example, advances granted, then abandoned , by the National Center for Cinematography for the benefit of a company specializing in the production of films and audiovisual programmes);
balancing subsidies paid to a company in order to offset a posteriori a deficit resulting from economic conditions, management errors attributable to the company or any event not covered by specific constraints imposed on it by a third party ;
subsidies paid to a company, the amount of which is determined globally taking into account the total costs of operating the economic activity of the latter, and which are not directly linked to a taxable operation of this company. This is particularly the case for sums that may be paid to an area developer under a development operation when these sums are paid globally without specific assignment to a taxable operation ;
sums paid to companies by approved pooling organizations in the context of continuing professional training ( XIII § 300 to 320 of BOI-TVA-BASE-10-20-40-10 );
recruitment assistance premiums received by companies, since they do not constitute consideration for the provision of services;
aid or subsidies intended to cover social charges (hiring apprentices for example);
aid which is a pure and simple encouragement to hiring (for example aid for the creation of local initiative jobs);
subsidies which cover a charge unrelated to the company’s productive activity (aid intended to pay the salaries of educators hired by intermediary companies or work assistance centers for the disabled);

The same applies to the aid paid by the State pursuant to the provisions of Article L. 5213-19 of the Labor Code (C. trav.) to compensate for the additional cost of charges resulting from the employment of workers with reduced professional capacity ( RM Migaud, n° 8607, JO AN of March 30, 1998, p. 1795 ).

subsidies paid to private local radio stations when these sums do not constitute consideration for the provision of services or the additional cost of a taxable transaction ( BOI-TVA-CHAMP-10-10-70 );
subsidies which are not intended to lower the price of the delivery of goods or the provision of services below the usual market price of these goods or services or, failing that, their cost price. This is the case, for example, with aid paid in the agricultural sector by agricultural offices to support the functioning of markets (aid paid by OFIVAL, ONILAIT, ONIFHLOR, ONIVINS, ONIC, ODEADOM, ONIPPAM, FIRS, and FIOM and EAGGF);
transport payment, a tax levy instituted by the authorities organizing public passenger transport services (local authorities or unions, public establishments on which the service depends) and paid by employers in order to contribute to the financial balance of these services or participate in the financing of their investments, pursuant to article L. 2333-64 of the general code of local authorities (CGCT) and article L. 2531-2 of the CGCT , which, when perceived by a local authority which directly operates its public passenger transport service, has no direct and immediate link with the price of the service;
the payment by the State of the compensation provided for in III of article 181 of the law n° 2021-1900 of December 30, 2021 of finances for 2022 in order to cover the residual losses borne by the suppliers of natural gas at the regulated tariff of sale of natural gas (TRVg), subject to the price freeze mechanism provided for in I of article 181 of finance law no. 2021-1900 of 30 December 2021 for 2022;
the payment by the State of the compensation provided for in VIII of article 181 of law n° 2021-1900 of December 30, 2021 on finance for 2022 in order to cover the loss of revenue incurred, between the entry into force of the tariffs electricity mentioned in VI of article 181 of finance law no. compared to the tariffs applicable on December 31, 2021) and their first change for the year 2023, by the electricity suppliers mentioned in article L. 111-54 of the energy code (C. energy)for their offers at regulated sales tariffs and by electricity suppliers for their market offers constitute charges attributable to public service obligations, within the meaning of Article L. 121-6 of the Energy Code , offset by the State ;
the exceptional aid instituted by decree no. 2022-423 of March 25, 2022 relating to exceptional aid for the acquisition of fuels .

With regard to the exceptional aid for the acquisition of fuel, please refer to BOI-RES-TVA-000107 .

210

The overall equipment grant is a State contribution to the investment expenditure incurred by the municipalities, the departments and their groupings ( law n° 82-213 of March 2, 1982 relating to the rights and freedoms of the municipalities, the departments and Regions, Art. 103 ).

When it relates to investments used for the exercise of an activity subject to VAT automatically or optionally, the overall allocation for equipment received follows the system of equipment subsidies.

The sums received in this respect are therefore not to be included in the VAT tax base of their beneficiary.

220

Sums paid by the State to companies under the initiative-employment contract ( C. trav., art. L. 5134-65 et seq. ) are not subject to VAT as long as they constitute neither the of a service provided to the State, nor the price supplement for operations carried out by their beneficiaries.

II. Allowances

230

The general term indemnity designates sums of various kinds which do not all follow the same regime with regard to VAT.

A. Indemnities included in the tax base

240

To be subject to VAT, the allowances must correspond to sums received in return for an individualized provision of services rendered to the person who pays it or for the delivery of goods.

Conversely, an indemnity whose exclusive purpose is to repair a commercial loss, even a common one, does not have to be subject to VAT since it does not constitute consideration for a provision of services or of a delivery of goods.

250

To determine the VAT rules applicable to an indemnity, it is therefore necessary, in each factual situation, to analyze the conditions for its payment.

If the sum represents, for the person who pays it, consideration for a service rendered to him, it will be necessary to conclude that this sum is taxable regardless of whether it results from the application of the contract or the law. or the fact that the amount was fixed by the judge.

In this respect, for the determination of the applicable system, it is recalled that the administration is not bound by the legal qualification given to the indemnity by the parties. The fact that an indemnity paid, in particular in the context of the premature termination of a leasing contract, is qualified as an indemnity for termination does not, in itself, make it possible to conclude that the taxable or non-taxable nature of this amount.

In addition, the mere fact that the payment of compensation is subject to the beneficiary’s waiver of any legal recourse cannot be considered as a service rendered to the paying party.

260

By way of illustration, the following are particularly considered as consideration for a service:

the security deposit kept by a real estate developer in the event of withdrawal by the candidate buyer of a dwelling (this sum constitutes the remuneration of the property reservation service);

The administrative judge ( CE, decision of October 23, 1998, n° 154039, Société foncière et d’ménagement de l’Hautil ) considers that the security deposit kept by the seller in the event of the buyer’s withdrawal constitutes remuneration for the service rendering of the reservation of a property for the benefit of a prospective buyer and presents a direct link with this service.

the indemnity paid in the context of the termination of a building works contract, when it constitutes, in fact, the remuneration for the start of execution;
certain indemnities paid in the event of termination of contract:
the compensation paid in connection with the termination of a contract for the supply of goods, the purpose of which is to compensate for the expenses incurred by the supplier for the implementation of a manufacturing process and thus to ensure a balance economics of the contract ( EC, decision of December 15, 2000, no. 194696, SA Polyclad Europ );
the predetermined sums received by an economic operator in the event of early termination of a contract for the provision of services providing for a minimum period of commitment, when this loyalty period is an integral part of the total price paid for the provision of services ( CJEU , judgment of 22 November 2018, case C-295/17, Méo, ECLI:EU:C:2018:942 ; CJEU, judgment of 11 June 2020, case C-43/19, Vodafone Portugal-Comunicações Pessoais SA, ECLI:EU:C:2020:465 );

Note: It follows from the aforementioned case law that a sum whose payment is provided for in the event of early termination of the contract and whose purpose is to ensure the economic equilibrium of the latter, must be considered as an element of the price.

the compensation paid to the lessor, due to the early termination of a financial lease for a reason attributable to the lessee and corresponding to the sum that this operator would have received during the rest of this period, is an integral part of the total amount that the lessee has undertaken to pay for the performance of the contractual obligations ( CJEU, judgment of 3 July 2019, case C-242/18, UniCredit Leasing, points 68 to 76, ECLI:EU:C:2019:558 );
indemnities for the early termination of commercial leases, when they remunerate the tenant’s waiver of his right to occupy the property and thus enable the lessor to conclude a new lease under more advantageous market conditions ( CE, decision of the February 27, 2015, No. 368661, Catleya, ECLI:FR:CESJS:2015:368661.20150227 ).

Note : The CJEU, in its judgment of December 15, 1993, case C-63/92, Lubbock Fine & Co aligned the exemption regime for termination indemnities subject to VAT with that for rents, so as not to penalize the lessor who decides not to opt for VAT and will therefore not be able to deduct the VAT on the compensation in question. Thus, if the rents are exempt from VAT, the termination indemnity, in cases where it is placed within the scope of the VAT, will also be. Compensation for early termination of the lease could therefore fall within the scope of VAT, but be exempt.

the sums received by the lessor in return for the possibility granted to the lessee to free himself from his obligation to restore the premises at the end of the lease. These are situations where the lessee undertakes contractually to return the premises to the state in which they were at the start of the lease, which may involve the undertaking of repair work for him. The fact that the lessor releases the lessee from this obligation in return for the payment of an indemnity can be analyzed as a provision of services which consists in replacing the lessee for the performance of this work. The compensation for immobilization of the property for the period of the work, included by the lessor in the calculation of the sums due by the lessee released from his obligation to carry out the work,
the price of unused and non-refundable reserved capacities;

Example : Reservation of hotel rooms, visits, trips (including within the framework of the application of the margin regime commented on in BOI-TVA-SECT-60 ), activities, purchase of multiple-entry cards and cinema ticket books, etc.

The sums retained by passenger transport companies for unused tickets, when the equivalent of the price paid when the ticket was purchased is made up of the right that the passenger derives from it to benefit from the performance of the obligations arising from the contract of carriage, regardless of whether the passenger exercises this right ( CJEU, judgment of 23 December 2015, C-250/14 and C-289/14, Air France-KLM, ECLI:EU: C:2015:841 ).

Note: The following do not affect taxation:

the fact that the customer bears only a fraction of the price of reserved and unused capacities (for example, if in the event of a reservation of several nights, only the price of the first night is retained by the hotelier);
the terms of payment of the price by the customer. It does not matter whether it concerns sums paid in advance and not reimbursed or sums paid after the cancellation;
the circumstance that the customer formally renounces the use of capacities before the start of the reservation period or does not show up on the agreed day without notifying the service provider beforehand.

In this case, the sums actually paid are subject to VAT when they can be analyzed as consideration for having benefited, between the reservation and the waiver, from the right to use the capacities during the reservation period. . It is only otherwise if these sums are analyzed as indemnities in the sense detailed in II-B § 300 et seq .

the sums which can be analyzed as the consideration for a right of withdrawal by the purchaser, independently of the circumstance in which he exercises it and including when the seller allows himself the possibility of marketing the reserved capacities to a third party. This is particularly the case for sums that can be analyzed as forming part of the operator’s pricing policy aimed at modulating the price of the service according to greater or lesser flexibility of waiver by the customer.
the unforeseen allowance, provided for in 3° of article L. 6 of the public procurement code .

270

With regard to the indemnities received by commercial agents upon termination of the contract binding them to their principal, may in particular be analyzed as the consideration for an individualized provision of services rendered for the benefit of the paying party, and be subject to the VAT, the following sums paid to a commercial agent upon termination of his agency contract:

commission reminders (regardless of their name: return commissions on sampling, compensation for client sampling, etc.) which correspond to commissions due for transactions carried out before the termination of the agency contract and which are therefore paid by the principal in return for the provision of agency services;
compensation paid under a non-competition clause when it remunerates an obligation not to do ( CGI, art. 256, IV-1° ).

Conversely, an indemnity whose sole purpose is to repair damage will not have to be subject to the tax.

In the event that the payment of an indemnity corresponds partly to compensation for the damage suffered (non-taxable) and partly to sums due for arrears of commission (taxable), the tax treatment should be applied to each. corresponding, notwithstanding that the payment is presented as a payment of a single indemnity.

280

With regard to the transfer allowances paid between professional football clubs during the transfer of players, they must, in application of the provisions of I and 1° of IV of article 256 of the CGI, be subject to VAT from then on. that they constitute consideration for services provided for consideration.

The sums which are paid between the clubs within the framework of the loan of players (temporary transfers) are also subject to VAT.

290

Compensation received following requisitions of movable property by the public authority is taxable by virtue of an express provision of the law (CGI, art. 256, II-3°-a).

B. Compensation excluded from the tax base

1. Principles

300

Indemnities which are real damages, that is to say which only sanction the non-performance of an obligation ( civil code (C. civ.), art. 1217 and following ) or, in general , the lesion of any interest ( C. civ., art. 1240 ) do not constitute consideration for transactions subject to VAT.

310

In application of the criteria defined in II-A § 240 and 250 , it is accepted that the following are not included in the tax base:

compensation paid by insurance companies following claims (fire, theft, etc.); it is also admitted, by way of tolerance, that carriers and insurance companies are not taxed on the realizable value of the goods or objects which are abandoned to them by the owners of the latter during the settlement of claims;
the eviction compensation, increased by default interest, awarded in court to the operator of an expropriated sand quarry ( RM Restat, no. 415, JO Senate of February 3, 1960, p. 14 );
the eviction compensation provided for in Article L.145-14 of the Commercial Code ;
the compensation provided for in the contract and paid by a manufacturer to a dealer of its brand for breach of the exclusivity contract;
the clientele allowance paid to sales representatives under the conditions provided for in article L. 7313-13 of the C. trav. ;
the indemnity which a contractor obtains by judgment by way of reimbursement of the value of the stocks of materials, which he has purchased for the performance of a contract concluded with a construction cooperative and which the latter has made terminate;
the deposit paid in application of article 1590 of the C. civ. ;

A sum whose sole purpose is to repair damage is not subject to VAT. In this respect, the European Union law judge ( CJCE, judgment of July 18, 2007, case C-277/05, Société thermale d’Eugénie-les-Bains, ECLI:EU:C:2007:440 ) considers that, when they are kept by the service provider to whom they were paid, the deposit within the meaning of article 1590 of the civil code has the nature of lump sum compensation for termination paid in compensation for the damage suffered as a result of the failure of the customer and are therefore not, as such, subject to VAT.

The fact that the amount of the deposit, in the event of actual performance of the service, is deducted from the price of this service is not such as to call this conclusion into question.

Note : This case law relates to sums kept by the taxable person which can be analyzed as compensation for damage. This is not the case in particular when they are equal to the price to be paid for the service or when they are collected in the absence of such damage ( CJEU, judgment of December 23, 2015, C-250/ 14 and C-289/14, Air France-KLM, ECLI:EU:C:2015:841 , point 48 to 50). It also does not cover non-refundable sums, including less than the price, which are analyzed as consideration for a commitment made by the seller, regardless of whether or not he had to honor it ( II-A § 260 ).

compensation for illegal occupation set by a penalty clause in the lease for situations where the occupant does not comply with his obligation to vacate the premises, when, given the circumstances of the case, no provision of service or delivery of good does not constitute their consideration;
compensation set by the court and paid for illegal occupation;

The indemnities fixed by the judicial judge and paid for the illegal occupation of a building were intended solely to compensate for the damage caused to the owner of the premises by the occupation without title and did not constitute consideration for the provision of services to onerous title liable to VAT ( EC, decision of 30 May 2018, n° 402447, Armor Immo, ECLI:FR:CECHR:2018:402447.20180530 ).

compensation received by commercial agents upon breach of the contract binding them to their principal.

The administrative judge ( CAA of Nancy, judgment of November 29, 2007, EURL ACB, n° 06NC00762 ) considers in this situation that the compensatory indemnity paid (in application of article 12 of law 91-593 of June 25, 1991, codified in Article L. 134-12 of the Commercial Code) to a commercial agent is not subject to VAT when the takeover by the principal of the customers acquired by this commercial agent during the period of performance of the agency contract does not characterize an individualized provision of services falling within the scope of the tax.

In the case of the payment of a global indemnity, only the fraction of this indemnity which can be analyzed as the consideration for an individualized provision of services rendered by the commercial agent for the benefit of his principal must be subject to VAT (subject to subject to being able to break down the part of the indemnity compensating for damage from that coming in return for an individualized provision of services rendered for the benefit of the principal in the case of the payment of a global and fixed indemnity):

repayments by Electricité de France (EDF) to local distribution companies (ELD) designated as emergency suppliers pursuant to Article L. 333-3 of the Energy Code , intended to compensate for the additional cost linked to the impossibility for these emergency suppliers to buy electricity at the ARENH tariff (regulated access to historic nuclear energy) which defaulting suppliers benefited from. The fact that these suppliers are obliged to make credit notes to their customers in order to place them in a situation similar to that in which they found themselves before the failure of their supplier has no impact on the compensatory nature of these repayments and does not allow qualify them as price supplement subsidies.
the demurrage mentioned in article R. 5423-23 of the transport code (C. transp.) and in article D. 4451-3 of the C. transp. , as well as sums of the same nature under the law of foreign countries, insofar as these sums are due due to the non-performance by one of the parties of obligations provided for in the contract. Sums other than demurrage, such as, for example, postage re-invoiced by the shipowner due to exceeding the laydown time, remain subject to the tax.

2. Special cases

has. Compensation for damage paid by a common carrier to a motor vehicle dealer carrying out the repair himself

320

A vehicle suffers damage during transport. The carrier leaves it to the consignee, dealer of a car brand, to carry out the repair of the damaged vehicle himself and pays him compensation. A dealer who himself repairs a vehicle he intends to sell is not liable for VAT either on the cost of the repair or on the amount of compensation paid to him by the public carrier. , responsible for the damage; in addition, he may deduct the tax charged on the supplies and spare parts used for the repair of the vehicle. Consequently, the interested party must not charge VAT on the repair costs for which he requests reimbursement from the carrier ( RM Dassié, n° 7762, OJ AN n° 3 of January 17, 1970, p. 116).

b. Credit insurance

330

To guarantee themselves against the risks resulting from the insolvency of their customers, certain merchants take out so-called “credit insurance” contracts with specialized insurance companies which replace the debtors to settle, at least partially, the unpaid creditors. .

The compensation itself paid under a credit insurance contract is not subject to VAT. On the other hand, the part of the claim that the creditor recovers in addition to this compensation, either directly or through the insurer, no longer has the character of damages and must be subject to VAT.

The sums that the insurance company possibly recovers from debtors, beyond the settlement made to the insured and without paying them back to him, are subject to the single tax on insurance agreements ( CGI, art. 991 et seq. ) and are therefore exempt from VAT ( CGI, art. 261 C, 2° ).

vs. Compensation received by lessors in the event of damage caused to the rented property

340

Leasing or simple rental companies offer contracts that generally require their customers to take out insurance to cover damage that may be caused to the leased property. The damage may in particular consist of the total loss of the property following, for example, theft, fire or accident.

The insurance policy thus taken out by the tenant usually includes a clause stipulating that the compensation provided for in the event of a claim must be paid directly to the financial lessor by the insurance company.

The Council of State, in a decision of July 29, 1998 ( EC, decision of July 29, 1998 no. 146333, SNC Géfiroute ), ruled that the sums received by a lessor, in performance of insurance policies that its customers were contractually bound to subscribe, were not received in return for services provided for consideration and should not, therefore, be subject to VAT. Indeed, these sums, representative of the market value of the insured vehicles before their loss, are not intended to compensate for the loss resulting for the lessor from the premature termination of the contract, but to compensate him for the non-performance by its tenants of their obligation to return the leased property at the end of the lease.

Indemnities intended to compensate leasing or simple rental companies for the sole loss of the vehicle and which correspond to the market value of the property at the time of the incident therefore do not have to be subject to VAT.

It is specified that when the indemnity paid by the insurance company only partially compensates for the market value of the property, the additional sum that the tenant may, if necessary, pay for the compensation in this respect to be total, does not is also not subject to VAT.

Source: gouv.fr

Taxable amount

Tax base – Rules applicable to all taxable transactions – Subsidies and allowances