France VAT: A Guide for Foreign Investors (2025)

1. VAT Rates:

• Standard VAT Rate:
  • The standard VAT rate in France is 20%.
    This applies to most goods and services.
  • Reduced VAT Rates:
    • France also applies reduced VAT rates:
      - 10%: Applicable to certain goods and services, such as passenger transport, restaurant services, and some cultural events.
      - 5.5%: Applicable to essential goods and services, such as most food products, certain cultural events, and social housing.
      - 2.1%: Applicable to specific goods, such as certain medicines and press publications.
  • It is very important to verify the current exact reduced rates and the items that they apply to with the French Tax Administration (Direction générale des Finances publiques - DGFiP) as they may change.

2. VAT Registration:

• Thresholds:
  • The thresholds for VAT registration vary depending on the type of business activity.
  • It is very important to verify the current exact thresholds with the DGFiP, as they are subject to change.
  • Foreign businesses conducting taxable activities in France are generally required to register for VAT, regardless of thresholds.
• Registration Process:
  • Foreign businesses must register with the French tax authorities to obtain a VAT identification number.

3. Input VAT Recovery:

• Deductibility:
  • Businesses registered for VAT can generally deduct input VAT incurred on purchases related to their taxable supplies.
  • Certain restrictions apply to input VAT deductions, such as for specific entertainment expenses and certain vehicles.
• Reimbursement:
  • If the input VAT exceeds the output VAT, businesses can claim a VAT refund from the French tax authorities.

4. Reverse Charge Mechanism:

• Application:
  • The reverse charge mechanism applies to certain transactions, particularly those involving services provided by non-residents and intra-community acquisitions.
  • In these cases, the recipient of the goods or services is responsible for accounting for the VAT.

5. VAT Returns and Payment:

• Filing Frequency:
  • Businesses must file VAT returns periodically, with the frequency depending on their turnover.
  • Returns can be filed monthly, quarterly, or annually.
• Electronic Filing:
  • Electronic filing is mandatory for most businesses.
• Payment Deadlines:
  • VAT payments are due by the deadlines specified by the DGFiP.

6. Important Considerations for Foreign Investors:

• French Tax Administration (DGFiP):
  • The DGFiP is the primary authority for VAT matters in France.
• Accurate Record-Keeping:
  • Maintain detailed records of all VAT transactions.
• Compliance:
  • Ensure compliance with all VAT regulations and deadlines.
• Professional Advice:
  • Seek professional VAT advice to ensure compliance and avoid penalties.
• EU VAT Directives:
  • French VAT is based on EU VAT directives.

Key Takeaway:

• France's VAT system is aligned with EU standards.
• Compliance is essential to avoid penalties.
• Digital filings are the standard.
• It is very important to stay updated with the guidelines published by the DGFiP.