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VAT group option possible until October 31 at the latest

Published on September 26, 2022 by Pierre Belhache - 4 mins reading time
SMALL BUSINESSES Companies Procedures VAT

The optional VAT group scheme, which comes into force on January 1, 2023, will enable a group of companies to appoint a "single taxable person" for VAT purposes. The main aim of this measure is to reinforce the neutrality of the tax on groups' organizational choices. It will be available until October 31.

Designation of a single taxpayer

From 2023, companies with close economic, financial and organizational ties will be able to form a VAT group, provided they opt for this system before October 31, 2022.

Companies belonging to the same group, which may be companies owned by a single person, companies carrying out interdependent activities, or companies under common management, will have to appoint one of their members as their representative. This single VAT payer will be responsible for VAT declarations, payments and claims.

Advantages of opting for the VAT group

In concrete terms, the VAT group will replace the VAT exemption for services rendered to their members previously enjoyed by independent groups of people. From 2023, the exemption will no longer apply solely to services rendered in the health and education sectors, or by non-profit organizations. Companies in the banking and financial sector will also be eligible, as will those with international operations.

The main advantage of opting for the VAT group is that it helps members' cash flow. On the one hand, intra-group flows will not be subject to tax, and no VAT credit will be carried forward or reimbursed. Secondly, the single taxpayer will fungibility the VAT credits and debts of all group entities into a single declaration. This represents a major cash-flow advantage for companies, by limiting the amount of VAT to be paid and bringing forward the allocation of credits that would normally be carried forward or refunded.

Imposed eligibility criteria

Companies wishing to form a VAT group must exercise this option no later than October 31, 2022.

Article 256 C of the French General Tax Code (CGI) sets out the following eligibility conditions:

  • The group must include at least two taxable persons for VAT purposes within the meaning of article 256 C of the CGI ;
  • Entities must not belong to another VAT group;
  • Members must have the headquarters of their economic activity or a permanent establishment in France;
  • Members must be closely linked economically, financially and organizationally.

If these criteria are met, companies can submit their request to the DGFIP, ensuring that it includes :

  • members' names and individual tax identification numbers
  • the name and address of the company designated as the sole taxpayer
  • the nature of the activities carried out by each member company
  • their agreement to join the group.