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Wrong VAT rate: what consequences for the craftsman?

Published on October 25, 2023 by Pierre Belhache - 4 mins reading time
Professional VAT Case law Self-employed BTP Invoices Taxes

In a July 6 ruling, the French Supreme Court (Cour de cassation) reiterated that a craftsman cannot demand a supplement from his customer following theissue of an invoice with an incorrect VAT rate. Payment of the missing amount remains the responsibility of the contractor, who must assume the consequences of his miscalculation.

Incorrect VAT rate

In this case, a craftsman had undertaken reconstruction work on a dwelling house after a fire. He then invoiced the work at a reduced VAT rate of 5.5%, even though the work did not qualify for this rate. Realizing that he had made a mistake, he asked his customer to pay the difference between the amount already paid and the amount he should have received if the correct VAT rate had been applied. However, the latter refused, citing the contractor's professional status and his obligations as a tax collector through his artisan business account.

When carrying out work on residential premises, the owner must complete a Cerfa form and hand it over to the professional no later than the time of invoicing. It is up to the contractor to declare which work qualifies for reduced-rate VAT (10% or 5.5%). Certain types of work are not eligible for the intermediate or reduced VAT rate, such as raising the height of a building, refurbishing more than half the shell, or increasing the floor area of existing premises by more than 10%. In these cases, the standard 20% rate applies.

No claims without prior agreement

The Court of Appeal upheld the craftsman's claim, ruling that the work invoiced and paid for with a reduced VAT rate of 5.5% should have been subject to 19.6% VAT. The customer contested this decision and appealed to the French Supreme Court. In his view, in the event of an error in the VAT rate calculated, the amount due should remain payable by the contractor in his capacity as tax collector and professional.

The French Supreme Court (Cour de Cassation) did not uphold the decision of the Court of Appeal. In a ruling handed down on July 6, 2023, it states that a professional cannot claim additional VAT from his customer if an invoice with an incorrect rate has been issued, unless the parties have agreed to such a rectification, or if the customer has inaccurately completed the tax certificate issued by the craftsman.

 

In this case, there was no agreement between the parties to rectify the situation. Furthermore, the client had not provided the professional with an erroneous certificate. Consequently, the reduced rate of 5.5% mentioned on the invoice remained applicable. The company was therefore ordered to pay VAT at the rate of 19.6% on the amount that should have been invoiced.