FRANCE: CERTIFICATE OF VAT EXEMPTION ON IMPORTS
The Tax-free License for imports, also known in France as "AI2 Certificate", is a customs relief procedure allowing any business registered for VAT in France, to import goods from abroad (especially from countries outside the European Union), in total exemption of VAT.
The importer will not have to pay VAT to French Customs, resulting in a tax relief in terms of cash flow.
We remind that the benefit of the scheme is opened to any company registered for VAT in France, whether established in France or abroad. Thus, foreign companies (established within or outside the EU) can, if they meet the criteria, apply for an authorization to import free of VAT in France.
In order to use the special scheme for importing free of tax, French or foreign operators must meet all the following conditions:
- Being a company registered for VAT in France for the purposes of its economic activities.
- The tax exemption system is applied to goods intended to be re-exported in the state or after processing (including intra-Community deliveries, deliveries with installation or assembly by the seller, and certain distance sales via the Internet).
Watch out, it is not required that the goods re-exported are identically the same which have been imported free of tax.
However, the exemption may apply only to goods that may be subject to an export delivery. Fixed assets or goods intended to be sold on the French domestic market cannot be imported under the VAT exemption scheme.
Is it necessary to be the owner of goods imported under the exemption scheme ?
In order to take advantage of the system of tax-free imports, it is not necessary for the importer of record to be the owner of the goods entering France. However, import transactions should be done in the course of execution of a taxable supply.
For example, a service provider may use its personal tax-free imports’ quota in order to introduce into France goods intended to be shipped back after processing or repair, to the ordering party established outside the European Union.
Details on limitations and ceilings
The value of the goods which can be imported under the Tax-free License is limited to the total value of exports carried out during the calendar year before the application for the license: it is the principle of ceiling or quota.
Therefore, if you have achieved an export turnover of EUR 100,000.00 during the year Y-1 (e.g. 2014), you will have for the year zero (e.g. 2015), an import ceiling under exemption of EUR 100,000.00. Every import flow beyond the quota will be done under the standard taxation scheme until you receive a new annual certificate.
With regard to new operators, a tax-free import authorization is also possible. But to assess the ceiling, it is necessary to provide some commercial documents proving the reality of intention to export from France.
Period of validity of the authorization
When the application for a tax-free import license is accepted, the tax authorities issue a permit for a capped amount as defined above, valid for one calendar year. It is therefore necessary to apply for a renewal of the authorization each year. The tax authorities will assess the evolution of export sales in order to set new limits.