When an overseas company is required to be registered for VAT in France, it is only in order to comply with the VAT rules in force in the country and being able to reclaim VAT paid on local purchases or to use the import VAT deferment scheme. As long as the foreign company does not have a “permanent establishment” in France, it won’t be subject to corporate income tax as it is the case for domestic companies.

The French VAT number allows any foreign company to run its business in France in the easiest way, without being subject to corporate taxation and other administrative burdens to which French companies are subject. The only requirement for most companies established outside the European Union is to appoint a French fiscal representative who will liaise with the French Tax Authorities on their behalf.

We have listed below seven (7) common cases that will require a foreign company to be registered for VAT purposes in France. In any case, we remind you that it may take up to two (2) and even three (3) weeks to register for VAT in France.

• 1. Importing goods into France from a non-EU country

• 2. Delivering goods from France to another EU country

• 3. Storing goods in France for your E-commerce business

• 4. Buying goods in France and reselling the same goods in France

• 5. Providing services connected with immovable property in France

• 6. Carrying out Intra-EU acquisitions in France

• 7. Exporting goods from France to a non-EU country

• What happens if I fail to register for VAT purposes in France?

1. Importing goods into France from a non-EU country

As a general principle, since 1 January 2022, a foreign company importing goods into France in its own name (i.e. acting as the importer of record) should get a French VAT number before the customs clearance can happen. The very fact of being the importer of record makes the registration for French VAT mandatory, no matter the end use of the goods imported into France.

Since the import VAT postponement scheme is now mandatory in France, no payment of import VAT will be required. Instead, the VAT amount that should have been paid to the French Customs will be declared in the French VAT return as output tax and deducted at the same time as input tax. It is worth noting that a French EORI number or at least an EORI number issued by another EU country is necessary for customs clearance in France.

Various business scenarios can lead your foreign company to import goods into France and act as importer of record. For example, it could happen that you have the opportunity to sell your products to a French customer, but the latter is requesting the use of DDP terms (Delivered Duty Paid) with a place of delivery in France (e.g. supply of machinery with installation or assembly).

It could also happen that you’re not selling any goods as such, but you are shipping your own goods into France for different business purposes planned at a later date:

A- You’re carrying out construction works or installation services on a site located in France and you need to import into France some materials that will be used for the erection of the structure (e.g. solar farms, industrial plants, exhibition booths, outlet displays, warehouse racks, storage shelves, other infrastructures, etc.);
B- You’re engaged either in e-commerce or in wholesale business and have to send from a non-EU country inventory into the French warehouses of an Online Marketplace (e.g. Amazon, Cdiscount, etc.) or a third-party logistics provider;
C- You’re shipping goods from a non-EU country in order to be stored in your customer’s premises located in France under a consignment sale or call-off stock arrangement;
D- You’re shipping (heavy) equipment into France for rental or leasing purposes;
E- You’re shipping networking equipment into a data centre in France (i.e. colocation services);
F- You’re shipping goods into France for processing, for analysis, tests and technical inspections.

2. Delivering goods from France to another EU country

A B2B delivery of goods from France to another EU country is called an Intra-EU supply. It is an export flow dispatched from France with this specificity that the country of final destination is always a Member State of the European Union. We can also find intra-EU supplies in Chain transactions and triangulation.

For example, a Welsh company buys goods from a French manufacturer and requests a delivery in a warehouse located in France. Later on, the Welsh company organises the shipment of the same goods to a VAT registered customer located in Italy.

The Welsh company is not registered for VAT purposes neither in France nor in Italy. However, it is deemed to be carrying out an intra-EU supply from France to Italy. Therefore, the Welsh company needs to apply for a French VAT number in order to comply with its VAT obligations in France (i.e. reporting the Intra-EU transactions in the French VAT returns, EC Sales Lists and Intrastat declarations). Of course, any input VAT incurred for business purposes in France can be reclaimed as well.

3. Storing goods in France for your E-commerce business

If your company is located abroad and you are intending to start selling goods over the internet to private consumers in France, you may be required to be registered for French VAT in order to carry out your business in the country. The registration of your company for VAT purposes will become mandatory in France if the two following statements apply to you:

• You are selling your products on your own website (displaying items and taking orders).
• You dispatch your parcels to consumers from a warehouse or a fulfillment center located in France.

Example:

A company from Turkey selling furniture from its own website would like to send consolidated shipments to France once a week. The furniture will be cleared for customs when the cargo arrives in a logistics hub in France. The importer of record will be the Turkish company. After the customs clearance, the packages will be split and subsequently dispatched to a dozen of French consumers. This Turkish company must apply for a French VAT number and file monthly VAT returns in France since all its French sales will be subject to 20% French VAT.

4. Buying goods in France and reselling the same goods in France

A foreign company buying and reselling the same goods in France is not liable of VAT registration in the country when the place of delivery is located in France and the customer to whom the goods are delivered holds a valid French VAT number.

However, if the place of delivery is in France but the customer to whom the goods are delivered does not hold a French VAT number (e.g. the customer is a private individual, a public body, a municipality, a hospital, a foreign company, etc.), the overseas vendor should apply for a French VAT number and charge local VAT to that customer.

A case to illustrate it is a German company “A” that places an order for goods with a UK company “B” and the place of delivery agreed is located in France. The UK company “B” buys the goods from a French manufacturer “C” according to Ex Works delivery terms (i.e. goods are collected from the factory in France).

The German buyer “A”, although registered for VAT purposes in its home country, does not hold an “active” VAT number in France. Therefore, the French domestic VAT reverse charge mechanism is not applicable in the transaction between “B” and “A”. In such a case, it is mandatory for the UK supplier to apply for a French VAT number and charge French VAT on its sale to the German customer “A”. The latter can seek the help of a tax practitioner to recover French VAT incurred.

5. Providing services connected with immovable property in France

A service connected with immovable property located in France is always taxable in France. When the service provider is not established in France and its customer holds a valid French VAT identification number, no French VAT should be charged since the domestic reverse-charge mechanism applies.

However, when the buyer of the service is not registered for French VAT (i.e. the buyer is a private individual, a public body, a municipality, a hospital, a foreign company, etc.), the foreign provider should always apply for a French VAT number in order to charge local VAT to its customer.

The services connected with immovable property can include:

– Building refurbishment;
– Architectural services;
– Construction works;
– Interior designing;
– Showroom rental;
– Pipeline cleaning;
– Space layout;
– Space rental;
– Etc.

The organization of a congress, symposium or conference hosted in France by a professional event organizer usually called PCO – “Professional Congress Organizer” – is a type of service that is in some ways close to “services connected with immovable property”. Indeed, these events generally take place in buildings specially designed to host them such as convention centers. However, it should be noted that the organization (or marketing) of these scientific events is subject to its own tax rules.

6. Carrying out Intra-EU acquisitions in France

When a company imports into France goods sourced from another EU country, this is called an Intra-community acquisition. As far as VAT is concerned, this kind of transaction usually follows a specific scheme of taxation. If the overseas business introducing the goods into France is not registered for French VAT, the immediate result is that the supplier of the goods established in another EU country will charge local VAT on its sale.

Let’s imagine, for example, that a UK company places a purchase order with a Spanish supplier and the place of delivery agreed is in France. If the UK company does not hold a French VAT number, the Spanish supplier will normally charge 21% VAT rate to its UK client since one of the conditions of a VAT exempt Intra-EU supply of goods is not fulfilled. In this case, the process of reclaiming VAT in Spain could become a real challenge for the UK buyer.

In addition to tax compliance issues, one of the practical reasons to get a French VAT number is to enable the foreign company intending to carry out an intra-EU acquisition in France to not pay local VAT in another EU country (i.e. the country of the supplier) where the tax reclaim process could be difficult.

An Intra-EU acquisition can also happen in France when a foreign company is transferring its own goods from one EU Member State to France. The fact that the goods are not purchased does not exempt the foreign company from registering for VAT in France in order to comply with its reporting obligations in the country.

7. Exporting goods from France to a non-EU country

It often happens that a foreign company purchases goods in France and exports them outside the European Union, either in the same state, or after processing. From a purely tax perspective, although an export flow properly cleared for customs is in principle a VAT-exempt transaction, the foreign company is nevertheless required to report it on its VAT return filed in France, hence the need to register for French VAT.

At the customs level however, since 1st October 2020, a company exporting from France must be established in the customs territory of the European Union. This means that a company established outside the EU (for example in the UK) can no longer act directly as the “Exporter of Record” listed in Box 2 of the customs declaration (SAD). Instead, the overseas company must appoint a person established in France (or in the EU) to act as “exporter” on its behalf.

The fact that the exporter from the customs point of view is a different entity does not exempt the foreign company from registering for French VAT, as it nevertheless remains “exporter” from a fiscal standpoint, i.e. the seller making an export delivery.

For example, a British company (A) wishes to export goods to Morocco, which it has previously purchased from a French supplier (B) and had them processed by a service provider (C) also located in France. Although company « A » may be an “exporter for tax purposes”, it cannot act in France as an “exporter for customs purposes”. It must therefore appoint a customs exporter established in the EU and also register for VAT in France in order to report the transaction in a French VAT return.

Depending on the country where the foreign company is incorporated, it could be mandatory to appoint a French fiscal representative who will file the application for VAT registration in France. We strongly recommend to anticipate the VAT registration process in France in order to easily recover any amount of French VAT incurred on purchases.

What happens if I fail to register for VAT purposes in France?

As a foreign company, you have to keep your business tax compliant in France as you already do in your home country. If you have taxable transactions or reporting obligations in France and you fail to register for French VAT, you are exposing yourself to a tax reassessment from the French Tax Authorities. Your details can be obtained by any authorized means like your business contacts.

The French tax administration usually requests assistance from its counterparts in foreign countries (e.g. HM Revenue & Customs in the United Kingdom) in order to lay hands on non-compliant companies and, where necessary, proceed to tax reassessments. In some cases, the tax investigation can cover a period of 10 years backward.

Questions?

We’re already helping overseas companies like yours to remain VAT compliant in France. Feel free to contact us if you need assistance for your specific case. For your questions, please you can send us a message to the email address mentioned on the contact form or you can dial our phone number: +33-261-536-544.