VATupdate

Guidance: Consequences of the exemption

Correlatively to the advantages procured by the franchise in terms of simplification and tax relief, this system includes certain obligations.

A. Regarding VAT

10

Taxable persons who benefit from the exemption are exempted from paying the tax.

20

Pursuant to Article 293 E of the General Tax Code (CGI) , the beneficiaries of the franchise cannot:

  • make no deduction of value added tax (VAT) relating to goods and services acquired for the purposes of their activity;
  • show the VAT on their invoices or on any other document in lieu that they can issue to customers.

30

Taxable persons placed under the VAT exemption regime constitute persons benefiting from a derogatory regime (PBRD) with regard to intra-Community VAT. They must therefore not, subject to the option provided for in Article 260 CA of the CGI , submit their intra-Community acquisitions of goods to VAT when the amount of these has not exceeded during the calendar year. previous year or does not exceed, during the current calendar year at the time of acquisition, the threshold of €10,000 mentioned in c of 2° of I of article 256 bis of the CGI .

Beneficiaries of the franchise can waive this derogatory regime under common law conditions and opt for the general regime of taxation of their intra-Community acquisitions. The taxation of intra-Community acquisitions, automatically or optionally, has no impact on the application of the base exemption to other transactions carried out by the interested parties. The latter obviously cannot exercise any right to deduct the tax paid for their intra-Community acquisitions.

The intra-community VAT identification number assigned to taxable persons who previously submitted their transactions to VAT will be rendered invalid in the European database of taxable persons. If the interested parties exceed the threshold of €10,000 mentioned in c of 2° of I of article 256 bis of the CGI or if they opt for the taxation of their acquisitions, they will then have to request, from the tax department companies managing their professional file, the reactivation of said number.

35

The application of the basic exemption regime has no consequence on the obligation of franchisees to pay VAT on imports of goods that they carry out in accordance with article 291 of the CGI . From 1 January 2022, this VAT is paid by any taxable person, including those who are exempt from paying VAT by the provisions of article 293 B of the CGI , on a turnover declaration filed with the competent tax department of the General Directorate of Public Finance (DGFiP).

Note : This is the same declaration as the one on which the taxable person declares the VAT on his intra-Community acquisitions when the threshold of €10,000 mentioned in § 30 is exceeded.

The beneficiaries of the exemption who carry out import operations for which they are designated as liable for VAT in accordance with Article 293 A of the CGI and Article 293 A quarter of the CGI are required to register for VAT for the purposes the declaration and payment of the tax relating to these imports in accordance with 2° of article 286 ter of the CGI .

This VAT registration for the sole purpose of declaring import transactions has no impact on the application of the basic exemption for the other transactions eligible for this regime carried out by the interested parties.

The declaration by franchisees of import VAT on a turnover declaration does not entitle them to deduct this VAT.

40

Beneficiaries of the exemption are not required to sign the declaration of exchanges of goods between Member States of the European Union provided for on dispatch or delivery ( CGI, art. 289 B and CGI, ann. III, art. 96 J ).

B. Regarding invoicing

50

In accordance with article 289 of the CGI and article 242 h of appendix II to the CGI , the beneficiaries of the exemption must, like all those subject to VAT, issue an invoice, a bill of fees or a document in lieu of transactions carried out with another taxable person or a non-taxable legal person.

Beneficiaries of the exemption must indicate on the invoices, the bill of fees or on any other document in lieu thereof, the mention: “VAT not applicable, article 293 B of the CGI”.

60

The indication of VAT on an invoice by a taxable person benefiting from the exemption would make the latter liable for the tax solely because of its invoicing, pursuant to the provisions of 3 of article 283 of the CGI . This invoicing would not give rise to a right of deduction for his client, pursuant to a of 1 of II of article 271 of the CGI .

C. In terms of taxes subject to the same procedural rules (declaration, control, litigation) as VAT

70

For taxes codified in the tax code on goods and services , the benefit of the VAT exemption has no impact.

For other taxes, unless otherwise provided, the beneficiaries of the exemption are exempted from payment when they are collected according to the same rules as VAT or turnover taxes.

D. With regard to payroll tax

80

The second paragraph of 1 of article 231 of the CGI provides that the remuneration paid by employers whose turnover during the calendar year preceding the payment of this remuneration does not exceed the limits defined in I, III and IV of article 293 B of the CGI are exempt from payroll tax.

E. In terms of annual contribution on rental income

90

Since they do not give rise to the actual payment of VAT, rental income granted by the beneficiaries of the exemption falls within the scope of the annual contribution on rental income provided for in Article 234 h of the CGI .

II. Increase or decrease in turnover above or below limits

A. Exceeding turnover limits

100

If the thresholds provided for in a of 1° and a of 2° of I of article 293 B of the CGI are exceeded , the basic deductible will be maintained for two years under the conditions below.

The basic deductible thresholds mentioned in article 293 B of the CGI are indicated in BOI-BAREME-000036 .

Companies whose turnover does not exceed the limits laid down in a of 1° and a of 2° of I of article 293 B of the CGI are automatically subject to the exemption regime based on VAT. .

However, they have the possibility of opting for the payment of VAT, in application of article 293 F of the CGI .

1. Exceeding annual limits

110

The benefit of the franchise for a year N (turnover for year N-1 not having exceeded the threshold provided for in a of 1° or a of 2° of I of Article 293 B of the CGI ) is maintained:

  • the year in which the threshold (N) is exceeded if the turnover achieved during this year (N) does not exceed the threshold provided for in b of 1° or in b of 2° of I of Article 293 CGI B;

Note: These different thresholds are assessed according to the activity concerned. It is therefore necessary to distinguish the delivery of goods from the provision of services (excluding sales to be consumed on site and accommodation services).

  • the year following that in which the threshold is exceeded (N+1) if:
    • the turnover for the previous year (exceeding year N) did not exceed the threshold provided for in b of 1° of I of article 293 B of the CGI or in b of 2° of I of the article 293 B of the CGI,
    • and the turnover of the penultimate year (N-1) has not exceeded the threshold provided for in a of 1° of I of article 293 B of the CGI or in a of 2° of I of article 293B CGI.

The basic deductible remains applicable in N+1 as long as the turnover for the current year (N+1) does not exceed the threshold provided for in b of 1° of I of article 293 B of the CGI or in b of 2° of I article 293 B of the CGI.

120

In order to determine whether the benefit of the basic franchise applies for a year N, it is necessary to assess the turnover achieved for years N, N-1 and N-2 if necessary, by compared to the thresholds in force in year N.

Example: A company A starting its activity on January 1 of year N carries out goods delivery operations. The thresholds used in this example are fictitious as well as the updates (the thresholds in force are indicated in BOI-BAREME-000036 ).

Year Turnover in € realized Thresholds in € of I of article 293 B of the CGI Taxation regime
at 1° b of 1°
NOT 70,000 71,000 78 100 Deductible throughout the year N
N+1 71,000 72,000 79,200 Deductible throughout the year N+1
because turnover N (previous year) < or = €72,000
and turnover N+1 (current year) < or = €79,200
N+2 73,000 (year of overshoot) 72,000 79,200 Deductible throughout the year N+2
because turnover N+1 (previous year) < or = €72,000
and turnover N+2 (current year) < or = €79,200
N+3 73,000 (year following that of the exceedance) 72,000 79,200 Deductible throughout the year N+3
because turnover N+2 (previous year) between €72,000 and €79,200
and turnover N+1 (penultimate year) < or = €72,000
and turnover N+3 ( current year) < or = €79,200
N+4 77,000 (year of overshoot) 74,000 81,400 Deductible throughout the year N+4
because turnover N+3 (previous year) < or = €74,000 (new thresholds)
and turnover N+4 (current year) < or = €81,400 (new thresholds)
N+5 82,000 (year following that of the exceedance) 74,000 81,400 Deductible until the last day of the month of the current year (N+5) preceding that during which the threshold of €81,400 is exceeded
because turnover N+4 (previous year) between €74,000 and €81,400
and turnover N+3 (penultimate year) < or = €74,000
N+6 83,000 (year following that of the exceedance) 74,000 81,400 No deductible: simplified tax regime (RSI) throughout year N+6
because turnover N+5 (previous year) > €81,400
N+7 75,000 76,200 84,800 No deductible: simplified tax regime (RSI) throughout year N+7
because turnover N+6 (previous year) between €
76,200 and €84,800 but turnover N+5 (penultimate year) > €76,200
Tax regime versus thresholds

130

For taxable persons carrying out mixed activities, maintaining the exemption for two years applies if:

  • the overall turnover for the previous year (N-1) is between the threshold provided for in a of 1° of I of Article 293 B of the CGI and the threshold provided for in b of 1° of I of Article 293 B of the CGI and the turnover for the previous year (N-1) relating to other services is between the threshold provided for in a of 2° of I of Article 293 B of the CGI and the threshold provided for in b of 2° of I of article 293 B of the CGI;
  • and the overall turnover of the penultimate year (N-2) is not higher than the threshold provided for in a of 1° of I of article 293 B of the CGI and the turnover relating to the other services of services of the penultimate year (N-2) is not higher than the threshold provided for in a of 2° of I of article 293 B of the CGI.

The same applies to taxable persons who carry out building work.

140

VAT taxation applies, under these conditions, to deliveries of goods made and services performed from 1 January of the year during which the taxable person becomes liable for the tax. Receipts relating to services performed before this date do not have to be subject to VAT.

150

In return, interested parties may exercise the right to deduct:

  • of the tax included in the expenses for which the right to deduct arose from 1 January of the year of liability. It’s like that :
    • for goods (fixed assets and other goods) when the delivery took place on or after January 1 of the year of liability;
    • for services performed and paid from January 1 of the tax year;
  •  the tax whose deduction is granted for the starting credit ( BOI-TVA-DED-60-40 ) defined in 4° of 1 of III and 2 of IV of article 207 of appendix II to the CGI , that is to say :
    • the tax relating to goods in stock on 1 January of the year of liability;
    • and the tax relating to fixed assets in use.

The corresponding deduction rights must be exercised, where applicable, by applying the provisional coefficients for the year resulting from the operating forecasts.

2. Exceeding limits during the year

160

A transition phase has been planned in order to limit the difficulties of changing from one regime to another.

From the moment when during the year the turnover of a taxable person exceeds the threshold provided for in a of 1° of I of article 293 B of the CGI or in a of 2° of I of article 293 B of the CGI, he must monitor its evolution.

When his turnover exceeds the threshold provided for in b of 1° of I of article 293 B of the CGI or in b of 2° of I of article 293 B of the CGI, he becomes liable for the tax for services provided and deliveries of goods made from the 1st day of the month during which these limits are exceeded.

Receipts relating to services performed before the 1st day of the month in which the taxable person becomes liable for VAT do not have to be subject to the tax.

170

Taxable persons who lose the benefit of the exemption must issue their customers with corrective invoices for the transactions of the month in which they were exceeded which had not been taxed or for the installments relating to transactions carried out from that month which had not been subject to tax. At the same time, they make their new situation known to the corporate tax department. For the sake of simplification, however, interested parties have the possibility, under their responsibility, of applying the tax from the 1st day of the month during which they consider it probable that the limit will be exceeded.

180

In return for the tax, interested parties may exercise the right to deduct:

  • the tax included in the expenses when the right to deduct arises from the date on which they became liable;
  • the tax deducted as part of the departure credit ( BOI-TVA-DED-60-40 ).

It is specified that fixed assets whose delivery took place before the 1st day of the month at the beginning of which the taxable person became liable are considered for the determination of the initial credit as being in use.

The corresponding deduction rights must be exercised, where applicable, by applying the provisional coefficients for the year.

B. Decrease in turnover which becomes less than the turnover limit

190

If during a calendar year, the turnover excluding tax achieved is less than the annual limits provided for by I of article 293 B of the CGI , the deductible is by right from 1 January of the year. next.

In this situation, the person liable:

  • no longer has to tax the deliveries of goods made and the provision of services performed from 1 January of the following year. Collections that occur after January 1 but relate to services performed before that date must however be subject to VAT;
  • must pay back the tax previously deducted for the stocks that he will use for the purposes of his henceforth untaxed activity ( CGI, ann. II, art. 207, VI-2° );
  • finally, must adjust the deduction rights exercised on movable and immovable investment property under the conditions provided for in 4° of 1 of III of article 207 of appendix II to the CGI.

200

The subsequent sale of movable property will therefore not be subject to value added tax ( RM Fosset No. 10315, JO Senate debates of September 20, 1990, p. 2047 ).

III. Option for payment of value added tax

210

The option can be exercised by all persons who, having a turnover lower than the limits of the franchise, do not wish to benefit from the latter.

A. Scope of the option

220

The option is global subject to the special rules applicable to local authorities.

This rule applies in particular to taxable persons who carry out both transactions falling within the limits of 1° and 2° of I of Article 293 B of the CGI .

However, this option has no impact on transactions which are, where applicable, exempt according to express provisions.

B. Duration of the option, renewal, termination

230

The option must cover a period of two years including the one during which it is exercised ( CGI, art. 293 F ).

Thus an option formulated on August 1 N will produce its effects until December 31 N+1.

This option is renewable by tacit agreement for the same duration, unless terminated at the end of each period. However, it is automatically renewed for the period of two years following that during or at the end of which the taxable persons having exercised this option benefited from a refund of value added tax provided for in IV of Article 271 of the CGI .

C. Form of the option and its denunciation

240

The option takes effect on the first day of the month during which it is exercised. It must be made in writing to the business tax department of the place of main establishment.

For new companies, the option must be exercised when filing the declaration of existence and identification, which must occur within fifteen days of the start of activity. It takes effect from the date of the start of activity, including when the declaration of existence and identification is filed during the month following the start of activity.

Example: A company is created on 20 July N. The declaration of existence and the request for the option to pay VAT are filed with the one-stop shop for business formalities on 3 August. In principle, the option should take effect on August 1 N. It will be accepted that it will take effect on July 20.

It is specified that the fact of indicating the VAT on the invoices or documents in lieu thereof without having expressed an express option for the payment of the VAT makes the taxable person liable for the tax on the basis of 3 of Article 283 of the CGI ( IB § 60 ) but in no way constitutes an express option. Consequently, such an approach prevents the taxable person from exercising any right to deduct. Attention is therefore drawn to the importance of formulating an explicit option for the payment of VAT.

The termination of the option must be made no later than the expiry of the previous option.

D. Consequences of the option

250

Persons who voluntarily place themselves under the VAT regime by exercising the option are subject to all the obligations incumbent on those liable for this tax. They are, in particular with regard to the rules of recovery and litigation of the tax, placed in the same situation as the taxpayers by operation of law.

They are, in principle, placed under the simplified tax regime. However, they may waive the simplified methods of payment of VAT provided for in 3 of article 287 of the CGI under the conditions set out in article 204 ter A of annex II to the CGI .

260

The conditions for exercising the right to deduct for persons who have exercised the option are those provided for all persons liable for VAT. Interested parties benefit in particular from an existing departure credit for stocks and fixed assets held on the effective date of the option ( CGI, ann. II, art. 207, III-1-4° and IV-2 ) when these taxable persons were not actually subject to VAT when the option was exercised.

Example: A company liable for VAT achieves, over the course of a year, a turnover lower than the lower limits provided for by I of article 293 B of the CGI . In principle, it automatically benefits from the exemption from January 1 of the following year, but formulates an option before January 31 for the taxation of its operations (effective date January 1 , III -C § 240 ). In this case, no adjustment of deduction rights (repayment / initial credit) is made due to the lowering of turnover and then of the option, the company having retained, without interruption, the quality of liable for the tax.

270

In accordance with the provisions of article 289 of the CGI , persons having opted must issue to their taxable customers an invoice or a document in lieu thereof mentioning the amount of the tax.

IV. Obligations and formalities

280

The deductible scheme requires a minimum follow-up. The beneficiaries of the franchise are subject to accounting and reporting obligations.

A. Accounting obligations

290

Taxable persons who benefit from the exemption on the basis of VAT provided for in I of article 293 B of the CGI must, pursuant to II of article 286 of the CGI , keep and present, at the request of the tax department, a summary register per year, presenting the details of their purchases of goods and services and a daily book, presenting the details of their professional receipts, this book and this register must be supported by invoices and all other supporting documents .

The recipe journal is served chronologically. Receipts corresponding to retail sales or services provided to individuals may be recorded globally at the end of each day when their unit amount does not exceed 76 euros, pursuant to 3° of I of Article 286 of the CGI.

The amount of transactions recorded in the receipts book is totaled at the end of the quarter and of the year.

300

Taxable persons who carry out mixed activities or building work ( II-A-1 § 130 ) must clearly show on the journal giving the details of the receipts as well as on the invoices that they are likely to issue to their customers the share relating to the delivery of goods and that relating to the services provided.

B. Reporting obligations

310

Taxable persons benefiting from the basic exemption must make themselves known to the business tax department of the place of their main establishment and have no other reporting obligation in terms of VAT than that provided for in the case of imports of goods ( IA § 35 ).

A declaration of existence and identification must be made within fifteen days of the start of activity at the one-stop shop for business formalities. This step is an opportunity for the taxable person to opt, if he wishes, for the payment of VAT under the conditions indicated in III-C § 240 . Failing this, the taxable person is automatically placed under the exemption regime from the start of his activity.

If the thresholds provided for in b of 1° or b of 2° of I of Article 293 B of the CGI are exceeded during the year , the taxable person is required to inform the tax department during the year. month following this excess by simple letter on plain paper.

Source: gouv.fr

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