Following the withdrawal of the United Kingdom from the European Union, as from 1 January 2021, UK companies must appoint a French fiscal representative in order to reclaim VAT they have paid in France. It is no longer possible for UK companies to submit their VAT refund claims through HMRC’s website.
The Value Added Tax or VAT is a form of sales tax created in Europe in the middle of 1950’s and now in force under different names (VAT, GST and Consumption Tax) in more than 160 countries around the world. In France, this tax is levied on the value of goods purchased or imported in the country. The standard VAT rate in France in 2020 is 20% and there are also reduced rates applicable to specific goods or services.
This guidance on VAT refund procedure in France is intended to help foreign companies which are seeking to know how they can claim back VAT they have paid on their business expenses in France.
1. The claimant should be a registered business
All tips posted here are intended only to businesses willing to recover VAT in France under the 8th or 13th Directive procedure. The word “business” means that you are a legal entity (company or sole proprietorship) duly registered as such in your home country.
A non-profit organization such as a professional association is eligible for VAT refund in France if it can provide a VAT/GST certificate in the country of establishment.
The present article is not applicable to travellers and tourists wishing to recover VAT charged on their shopping during their stays in France.
2. You should have a status of “taxpayer”
In order to be eligible to reclaim VAT paid on expenses in France, a foreign company should be able to prove that it has the status of “taxpayer” in its home country.
This requirement is fulfilled when the company provides a VAT/GST certificate issued by its local tax office. Other documents such as “Certificate of incorporation” or “Business registration certificate” or “Certificate of status of good standing” may be required when a system of VAT/GST or an equivalent sales tax system does not exist in the country of incorporation.
Note: For US companies, the required document is Form 6166 Certification of U.S. Tax Residency for VAT purposes. This document is generally issued by the local IRS office (the application should be filed with the full payment of fees at least 45 days upstream).
It should be reminded that a certificate of status of “taxpayer” is no longer required for EU based businesses. The VAT number of the EU company is enough to serve this purpose.
3. Check if your country is eligible for VAT refund in France
As a general principle, France does not grant refund of VAT to foreign businesses belonging to countries which do not have similar tax reclaim procedures in favour of French companies and which are listed in an official document published by the French Government.
Since an official list of non-eligible countries has never been published (until the date of this article), the refund of VAT is granted by default to all foreign companies regardless the actual country of incorporation.
4. Remember to appoint a fiscal representative in France
Non-EU companies have to appoint a fiscal representative located in France. The latter will handle the entire VAT reclaim procedure on behalf of the foreign company and will answer to the requests of the French Tax Authorities.
Please note that appointing a French tax representative like Corintax® is a legal requirement and a key condition for your claim to be processed by the tax office. Failure to appoint a fiscal representative will result in an automatic rejection of your application.
In order to save time and mitigate the risk of rejection, EU based companies can choose to outsource their French VAT refund claims to an experienced tax professional like Corintax®.
5. Determine the VAT liability of your company in France
One of the main conditions for your company to be able to recover VAT in France is that your company should not be in the obligation neither to collect French VAT (if you are selling something in France), nor to be registered for VAT purposes in France.
As each case is specific, only a qualified tax expert can tell you if your company meets the conditions. Feel free to send us an email for a free assessment of your specific case: vat@N0SPAM.corintax.com
6. Verify that VAT paid in France is refundable
It is obvious that you can reclaim French VAT only if it is refundable for the specific expenses incurred. Once more, only a tax expert can evaluate the refundability of VAT you have paid in France.
French VAT is refundable on the following business expenses:
- Rental of space for the erection of an exhibition stand during a trade show or any other promotional event.
- Purchase of tooling remaining in France (molds and industrial equipment) that are used to manufacture products subsequently sold to a French customer or exported abroad.
- Purchase of other goods or equipment remaining in France (e.g. products bought in France and resold to a VAT registered business in France or rent for a long term to a lessee under an Equipment Lease Agreement).
- VAT paid to French Customs when importing goods into France under DDP terms (it is strongly advised to contact us before a DDP shipment).
- Miscellaneous expenses incurred by foreign hauliers using French roads (such as fuel costs, highway tolls charges, costs for parking, cleaning and repairs).
- French import VAT on returned goods (e.g. items under warranty to be repaired or replaced).
French VAT is NOT refundable on the following business expenses:
- Unduly paid VAT: this is tax charged by a supplier on a good or service on which VAT is normally not applicable. You should contact your supplier to get a credit note or hire a tax consultant to handle the case if it is more complex.
- Accommodation expenses (e.g. hotel fees) for the staff of your company. VAT is however refundable when accommodation expenses are for people not belonging to your company’s staff (e.g. clients, partners, etc.).
- All expenses related to passenger transportation in France (e.g. car rental with or without a driver, gasoline, taxi receipts, train and airplane tickets, yacht rental including when mooring at berth, etc.). There are some exceptions where VAT will be refundable when the main activity of the claimant in the field of transportation justified it.
- Some goods and services purchased by travel agencies or DMCs (Destination Management Companies), and falling under the VAT special regime known as TOMS (Tour Operators Margin Scheme).
7. All paperwork should be correctly established
Purchase invoices should be issued to the attention of your company (full name and address). The customs clearance documents should mention your company as importer of record (IOR) in France.
Be advised that in order to act as the IOR in France, a foreign company must apply for an EU EORI number before the goods actually pass the Customs.
8. Check if you have the minimum amount for a VAT claim
The minimum amount of a quarterly VAT refund claim in France is 200 EUR for non-EU companies and 400 EUR for EU based companies.
In order to avoid a systematic rejection, you should make sure that each application you present on a quarterly basis reaches the above minimum.
9. Make sure to lodge your refund claim before the deadline
The deadline to file a VAT refund application in France is the 30th June of the year following the year of the tax point (for non-EU companies) or the 30th September of the year following the year of the tax point (for EU based companies).
The tax point can be either the date of payment (for services) or the date of delivery or import (for goods). Pay attention, the tax point for a service can be in some situations the date of the invoice and not the date of actual payment.
Our advice is to a start preparing your VAT refund application immediately upon receipt of the invoices or customs documents. Waiting the last minute can result in a total loss of your money, especially when a prior restyling of documents is required.
10. Be patient…
The average time scale before you get news from the tax office is between 1 to 4 months. You will have to be patient until you or your agent get(s) a decision.
Most of time, you will have a positive decision if everything has been done correctly.
It can however happen that the French Tax Authorities reject your VAT refund application. If such a situation occurs, you are advised to contact a qualified tax professional to check if an appeal is possible.
If you would like us to act as your fiscal representative in order to reclaim VAT paid or to be paid by your company in France, drop us an email to vat@N0SPAM corintax.com and we will be glad to assist you.