BUYING & SELLING GOODS IN FRANCE
It often happens that non-French companies order goods from their French suppliers and request a direct delivery to the final customers also located in France.
In such a case, there are two separate transactions falling under the French VAT regulation:
- The sale from the French supplier to the foreign company (the first sale)
- The sale from the foreign company to the final client (the second sale)
Each transaction is subject to a specific VAT rule in force in France.
The first Sale: from the French supplier to the foreign company
The supplier will charge French VAT to its overseas customer. There is no way to avoid this VAT because the delivery takes place within France. However, under certain conditions, this VAT is recoverable by the foreign company.
Note that standard VAT rate applied to most products in France is 20%. There is also a reduced rate of 10% or 5.5% applied to specific goods and services.
The second Sale: from the foreign company to the final client
The VAT treatment of this sale will depend on the nature of the final customer, especially if it is another company registered for VAT in France (B2B transaction) or a private consumer (B2C transaction).
In case of a B2B transaction:
If the final client is another company registered for VAT in France, the foreign company won’t need to charge local VAT on its sale invoice. However, the foreign company will be entitled to recover VAT charged by its French supplier.
For companies located within the European Union, a VAT refund claim can be filed through the electronic portal of their national tax administration. They can also choose to appoint a third party (a VAT Consultancy Company) who will deal with the VAT refund application.
Companies established outside the European Union will be obliged to appoint a tax representative in France who will prepare and file on their behalf the VAT refund claim. According to the French tax law, a VAT refund application in this case is not possible without the appointment of a local fiscal representative.
In case of a B2C transaction:
These transactions include the cases where the final customer is a private consumer, a company not registered for VAT in France and other non-VAT registered organizations like public bodies, associations and NGOs.
The foreign supplier will need to be registered for VAT in France and issue to its client an invoice including French VAT. On the periodic VAT return to be submitted to the Tax Authorities, the tax paid to the upstream French supplier will be offset against the sale tax collected.
Registering your company for VAT in France does not mean that you will form a new entity therein. The purpose of VAT registration is to enable the foreign company to comply with its local VAT obligations, while recovering the tax paid to its suppliers.