Domestic Reverse Charge

Reverse charge for non-established businesses

France has introduced an extended version of the reverse charge outlined in article 194 of the VAT Directive. Where a non-established supplier sells goods or services to a VAT registered client in France, the domestic reverse charge applies. It doesn’t matter if the supplier is register for VAT or not however the customer must have a French VAT number for the reverse charge to apply.

Invoice Requirements for Reverse Charge
The following reference should be included in the invoice when domestic reverse charge by a non-established supplier applies: “Autoliquidation – Article 283-1 du CGI”

Reverse charge on B2B Services in France

The general rule on B2B services as outlined in Article 196 of the VAT Directive states that any business not established in France and supplying services to a French VAT registered customer will not charge any VAT on the transaction and instead it will be reverse charged. The B2C rules state the transaction is where the supplier is located instead.

There are however a number of exceptions to this rule but where these exceptions apply the reverse charge is still applicable in France.

Services connected to immoveable property are located where the property is located.
> Passenger transport services will be located where the transport takes place
>Catering services are located where the catering takes place
Short term leasing of transport are located where the vehicle is put at the disposal of the customer
Access to conferences, fairs and exhibitions is located where the event takes place.

Reverse charge on specific goods in France

Domestic reverse charge may also apply on a specific type of goods, the conditions of which change when applying the reverse charge depending on which type of goods are traded.

Gas and electricity

  • Reverse charge always applies on the supplies of gas and electricity when supplied by non-established suppliers to customers established in France
  • If the gas and electricity is ultimately used in France then the reverse charge also applies if the customer is only VAT registered in France.
  • If the gas and electricity is used for purposes other than it’s actual consumption in France then reverse charge applies on all directly related transactions even if the supplier is established in France.The following reference should be included in the invoice: “Autoliquidation – Article 283-2 quinquies du CGI

Other goods and services
The following servies are also subject to reverse charge

  • Recycling and waste services when the customer is VAT registered. Reference used is “Autoliquidation – Article 283-2 sexdecies du CGI
  • Supplies of investment gold, reference used: “Autoliquidation – Article 298 sexdecies D du CGI
  • Supplies of services connected to immoveable property to a VAT registered subcontractor, reference oused “Autoliquidation – Article 298 sexdecies D du CGI”

Reverse charge VAT registration implications
A French VAT number cannot be issued if all of your supplies fall under the reverse charge rules such as importing goods and selling to French companies with a local VAT registration.

French use and enjoyment

Each Member State can introduce other exceptions to the B2B rule according to the place where the services have been used and enjoyed. This exception may be introduced to avoid double taxation or non-taxation.

France has introduced both negative use  in a number of B2C services and positive use on some B2B services. Article 259c of the French VAT code makes the place of supply in France on services where the customer is a non-taxable person established or domiciled in France. The supplier is outside of the EU and the service is effectively used and enjoyed in France.

The following services are however exempt from this rule;

  • immoveable property, cultural services, passenger transport, transport of goods, travel agencies, electronically provided services and intermediary services.

Mandatory Reverse Charge on Imports

The competent service for Import VAT will be changing from January 1st 2022. The DGFiP will assume control over all fiscal matters related to import VAT for goods clearing French customs. Due to this new rules and changes will come in to place which benefit importers in France.

From the 1st January 2022 ALL import VAT will be deferred and not paid upfront, this creates a huge cashflow advantage for importers. Instead the deferred VAT will be automatically included on the French VAT return by the 14th of the month. It will be the importers responsibility to check of the customs website the accuracy of the data prior to the 14th and correct this if necessary.

In addition the VAT deadline of the 19th will be extended to the 24th for businesses making imports into France adding another benefit. For full details check out our article here.

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