Following the entry into force of the new Union Customs Code (UCC) as from May 1, 2016, the french customs authorisation known as “Single Window Customs Clearance Procedure” (Procédure de Domiciliation Unique – PDU) is no longer available for new applicants. This permit has been replaced by the National Centralised Clearance (NCC) introduced by article 179 (1) of the UCC.
Any EU-based company (already registered for VAT purposes in France) wishing to opt for the deferment of french import VAT should be, under the new article 1695 II of the FGTC (the amendment is still in progress at the french parliament), either an Authorized Economic Operator (AEO “Customs simplification” or “Full”) or an authorized user of the National Centralised Clearance system (replacing the former PDU permit).
If the company is an authorized user of the National Centralised Clearance system, it will have to fulfil additional conditions listed in points a) to c) of article 39 of the UCC (an absence of any serious infringement of customs and tax legislation, a demonstration of a high level of control of the flow of goods and a good financial standing during the 3 last calendar years).
General framework :
During the Strategic Attractiveness Council held on 17 February 2014, the President of the Republic announced the introduction of a new measure of deferment of import VAT on the French periodic VAT returns in order to relieve the cash outlay of companies having regular import flows and improve the competitiveness of French seaport and airport platforms.
In the 2014’s draft of Finance Act (Amendment), the French parliament definitely enacted the new VAT scheme that will be applicable from January 1, 2015.
The choice was made to introduce the VAT reverse-charge mechanism in France only for operators importing goods through a Single Window Customs Clearance Procedure (PDU).
Reminder of the current system of deferred payment of VAT
The current system is based on the payment of VAT to the Customs Office when importing goods into France and its subsequent deduction on the periodic VAT returns filed at the French Tax Administration (DGFiP).
This regulation allows importers to deduct the import VAT on their sales tax returns filed between the 19th and the 24th day of the month following the import before actually paying this VAT to the Customs Office (DGDDI), usually by the 25th day of the month following the import.
In spite of its benefits, this scheme is regarded as disadvantageous, especially for SMEs which have neither the knowledge nor practice allowing them to benefit from these simplifications, and generally for companies that do not have opportunities to set up a deferred payment mechanism.
This system is now challenged because it maintains the principle of a disbursement of VAT due on imports.
Scope of the new VAT deferment system applicable as from 1 January 2015
Only operators importing goods through a Single Window Customs Clearance Procedure (PDU) will be able to apply the deferred payment of VAT due on imports in France. However, the scope may be subject to some changes in the future.
The PDU is a customs simplification granted to companies importing goods in France through at least two entry points (corresponding to two different Customs offices), provided that they meet the criteria of Authorised Economic Operator certification (AEO).
The Single Window Customs Clearance Procedure allows:
–> Centralization of all customs clearance procedures, accounting and payment of import taxes at a single customs office also known as the ‘domiciliation office’.
–> Import and export operations can be carried out from multiple entry or exit points on the French territory, but using the competence of only one customs office.
The scope of the new VAT deferment scheme is significant when considering the amounts of VAT collected in the context of current PDU procedures (around EUR 2 billion per year, representing 24% of the VAT collected by Customs excluding oil products).
Businesses do not need to hold an AEO certification in order to be able to benefit from the new VAT deferment measure. Existing holders of PDU permit can use the deferred payment system without further examination of their case.
It is also possible to grant the PDU permit to customs brokers in order to allow their clients (especially foreign companies) to benefit from the VAT reverse-charge mechanism.
The approach consisting to reserve the benefit of the scheme to trusted operators contributes to secure the Customs’ revenue and reduce the tax risk related to Reverse Charge Mechanism.
Implementation of the new import VAT deferment scheme as from 1 January 2015
From January 2015, the report of import VAT on the periodic VAT returns will be possible through an optional scheme managed by the Customs, and opened to VAT registered companies introducing goods into France under a Single Window Customs Clearance Procedure (PDU).
The Customs office is the authority competent to grant accreditation for the application of the VAT reverse charge on imports in France.
To prevent carousel fraud on import VAT, an electronic connection is established between the French Tax Office and the French Customs Administration in order to monitor transactions reported on the customs declarations and the periodic VAT returns.
The content published here above is based on information timely as of 9 May 2016, unless otherwise indicated. Amendments to the tax laws in the EU country covered here could have been passed recently. Therefore, readers should contact Corintax Consulting for further insights.