A foreign company established in the EU or outside the EU purchases from a French supplier manufacturing tools and equipment that will remain in France. The tooling (i.e. injection molds, numerical control machine tool or other industrial equipment) will be used to manufacture semi-finished or finished products which will then be exported outside of France. The foreign purchaser of the finished products is also the legal owner of the equipment and tools that remain in the manufacturer’s factories in France.
Question : if the sale of finished products to the foreign company is VAT exempt because the products are being exported, what about the invoicing of the tools that remain in France ? Should the supplier issue a sales invoice for the tooling that includes French VAT ?
We will answer to this question in this tax brief with the hope that it will be helpful to many overseas companies incurring tooling costs in France.
1. The general invoicing principle for a good remaining in France
Sales invoices for tooling remaining in France must include French VAT at the standard rate (i.e. 20% at the date of writing of this article).
In fact, according to the principle of VAT territoriality (refer to Article 258-I-c of the French General Tax Code), the place of taxation for the sale of tangible movable property is in France when the transfer of the right to dispose as owner takes place in France. Therefore, the sale will be always subject to French VAT, no matter if the buyer is a local or a foreign company.
The “transfer of the power to dispose as owner” must be understood as being the transfer of both title to the goods and control over the goods. In other words, it is the moment from which the buyer becomes the legal owner of the goods and has the immediate facility to use them as he wishes.
In the case for example of the tooling purchased and remaining in the premises of the manufacturer in France, the transfer of control over the goods to the foreign buyer does not generally involve the physical removal of said goods, but the new owner can decide to remove them at its own discretion.
2. The reclaim of French VAT by a foreign company
The foreign company to which French VAT has been charged for the purchase of equipment remaining in France is entitled to claim this sales tax by filing a refund application at the relevant tax office in France. Businesses established outside the EU should appoint a fiscal representative located in France (this appointment is mandatory by law) that will handle the refund claims on their behalf. For companies based in the EU, it is recommended to outsource this sensitive task to a specialist of French VAT recovery.
Corintax® is an authorized fiscal representative that can handle the VAT refund processes on behalf of overseas businesses incurring VAT expenses in France.
If you have further questions or you would like Corintax® to help you to reclaim VAT paid on goods purchased in France, feel free to send us your inquiry to vat@N0SPAM.corintax.com and we will be happy to assist you.