A Debit Entry in a Client Account Does Not Constitute Receipt for VAT Purposes

Summary

• Tax authority treated debit entries in a client account as triggering VAT chargeability. SCI Château de Nalys, a viticultural property in Châteauneuf-du-Pape, was subject to the simplified agricultural VAT regime under Article 298 bis CGI, under which VAT on sales becomes chargeable at the moment of receipt (“encaissement”). Following a tax audit, the administration issued VAT assessments, considering that debit entries recorded in the client account of company E.A. in Château de Nalys’s books constituted an effective receipt—particularly given the capital links between the entities and the theoretical possibility for the SCI to withdraw corresponding amounts.
• Court drew a clear distinction between a debit in a client account and an actual payment. The Court ruled that, unlike an entry in an associated current account (compte courant d’associé), a debit entry in a client account merely records that an invoice has been issued—it does not, in itself, constitute actual receipt of the amount. Therefore, it cannot be treated as an “encaissement” (receipt) within the meaning of Article 298 bis CGI. The administration’s argument based on capital links was also dismissed.
• Capital links alone do not create a presumption of receipt. The Court found that the fact that an associate of one of the debtor entities controlled the accounts of Château de Nalys did not prove that the SCI could withdraw funds at will. The mere existence of a common director between entities does not create a presumption of actual payment. The first-instance judgment in favour of the tax administration was annulled. This decision confirms a strict interpretation of the “chargeability at receipt” principle, without derogation for capital links.

Article

SCI Château de Nalys operates vineyards in Châteauneuf-du-Pape under the simplified agricultural VAT regime (Article 298 bis CGI), where VAT on agricultural sales becomes chargeable at receipt. The tax administration assessed additional VAT, arguing that debit entries in the client account of company E.A. in the SCI’s books constituted effective receipt, given the capital links between the entities and the theoretical ability to withdraw funds.

The Court of Appeal overturned the first-instance judgment. It ruled that a debit entry in a client account—unlike an entry in an associated current account—merely records the issuance of an invoice and cannot be equated with actual receipt of payment. Furthermore, the existence of capital links and a shared director does not create a presumption that the SCI could access the debtor’s funds at will.

This decision confirms that the “chargeability at receipt” concept must be interpreted strictly: only actual payment triggers VAT chargeability, and no derogation applies based on capital or personal ties between entities.

Source PwC

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