Updated guidance covers domestic and cross-border small-business VAT exemption

Summary

On 1 July 2026, the French tax authority updated its guidance on the VAT exemption for small enterprises, reflecting the EU cross-border regime introduced from 1 January 2025 and subsequent amendments to France’s domestic rules. [bofip.impots.gouv.fr]
Eligible businesses established elsewhere in the European Union may apply the exemption to French transactions. French-established businesses may similarly use the exemption in participating Member States, subject to both national thresholds and the overall EU turnover ceiling.
The guidance addresses turnover calculations, quarterly EU reporting, consequences of exceeding a threshold and deactivation of the special VAT identification number. Small businesses operating cross-border should centralise turnover monitoring because a threshold event in one jurisdiction may affect wider eligibility or reporting.

Article

The French tax authority published updated guidance on 1 July 2026 concerning the VAT exemption for small enterprises.

The update reflects the EU framework introduced by Directive (EU) 2020/285 and implemented in France through Article 82 of the Finance Act for 2024. Since 1 January 2025, a qualifying taxable person established in another EU Member State may request application of the French small-business exemption to transactions carried out in France.

A French-established business may also apply the corresponding exemption in another Member State that has implemented the cross-border regime. This represents a significant change from the traditional model under which the exemption was generally limited to businesses established in the country granting it.

Cross-border access is subject to a dual-threshold structure. The business must comply with the relevant national turnover limit in the Member State where it seeks exemption and the overall EU turnover ceiling. It must also follow the notification and reporting process through its Member State of establishment.

The guidance covers the scope of the regime, reference turnover, EU turnover declarations, consequences of entering or leaving the exemption and deactivation of the special identification number. It also reflects changes made by Law No. 2025-1044 of 3 November 2025 to the French domestic exemption. [bofip.impots.gouv.fr]

The exemption removes the obligation to charge VAT on covered outputs but generally prevents deduction of related input VAT. Businesses should therefore consider whether exemption is commercially beneficial, particularly where customers can deduct VAT or the business has substantial investment expenditure.

From a compliance perspective, turnover must be monitored across all relevant Member States. Systems should distinguish exempt domestic sales, cross-border exempt transactions, acquisitions, imports and purchases subject to reverse charge, since not all VAT obligations disappear. Businesses should also prepare for a transition to normal taxation when a threshold is exceeded and ensure invoices use the correct exemption wording.

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