As auto-entrepreneurs, also known as micro-entrepreneurs, are well aware, their status is in principle exempt from VAT. This means they can neither invoice their customers for VAT, nor reclaim it on their purchases.
However, it is possible for auto-entrepreneurs to become liable for VAT if, for example, they opt for the "régime réel d'imposition" (actual tax regime), or if they exceed thresholds set by the French government (in 2023: sales excluding VAT exceeding €101,000 for sales, or €39,100 for services). VAT is then due from the first day of the month in which the threshold is exceeded. It must be declared to the tax authorities.
If sales for the previous two years each exceed the required thresholds, the basic VAT exemption no longer applies for the third year. However, exceeding the threshold during the course of a calendar year does not systematically mean that the exemption is withdrawn, only that you are obliged to declare it. To do this, you need to take certain steps.
How do you file your VAT return if you're an auto-entrepreneur? Here are a few tips to help you make the right decisions.
Create your professional space on the administration website
All tax returns, whatever the company, must be submitted electronically via the tax website. Once you've created your business space, you can use it to declare and pay the main taxes, request refunds or consult your company's tax situation on your account. These online services are free and secure.
Apply for a VAT number
The intracommunity VAT number is essential, and must appear on all commercial documents, as well as on VAT returns. It is usually issued within 48 hours by the local tax office (Service des Impôts des Entreprises - SIE). In France, the number comprises the FR code, 2 digits, followed by the 9-digit SIREN number.
Even if the company is not liable for VAT, it can still apply for a number as a precautionary measure, without losing any of its advantages.
The tax authorities do not automatically issue an intra-Community VAT number to a self-employed entrepreneur. The request must be made online, via your business account on the impot.gouv.fr website.
Know your tax obligations
There are two VAT tax regimes: the simplified actual regime and the normal actual regime.
The simplified taxation system (RSI) is automatically applied to micro-businesses that become liable for VAT, with no special steps required on their part. Companies subject to this regime are required to pay half-yearly instalments, then to file an annual VAT return to regularize the situation.
The first instalment is due in July, and the second in December. They are normally calculated on the basis of the last annual VAT return (55% then 40% of the VAT due for the previous year). If this is not available, the entrepreneur must calculate the approximate amount himself. Be careful, as this amount must represent at least 80% of the VAT actually due, otherwise penalties will apply. In subsequent years, after calculating the amount, the tax authorities send out the advance payment notices. It is only possible to suspend the payment of a deposit if you are sure that the VAT already paid reaches the total amount of VAT for the year.
The annual recapitulative return, known as the CA12 or CA12 E depending on whether it is filed at the end of the calendar year or at the end of the fiscal year excluding the year-end, lists all VAT collected and VAT recoverable for the period concerned. This is when adjustments are made. Once advance payments have been deducted, the VAT balance is either payable or recoverable. The declaration must be submitted by the 2nd working day following May 1st, or if the financial year does not correspond to the calendar year, within three months of the end of the financial year. It must be filed on the impot.gouv.fr website.
Payments on account and the balance are made online via the entrepreneur's tax account. Please note that if the VAT due for the previous year was less than €1,000, no advance payment will be required.
Although auto-entrepreneurs are not obliged to call on the services of a chartered accountant, given their ultra-simplified bookkeeping, it can be a good idea to do so when it comes to VAT. The calculations aren't easy, and the tax authorities don't take kindly to mistakes.
Changing legal notices
From the moment auto-entrepreneurs switch to the simplified VAT system, they must, of course, remove the words "TVA non applicable, selon l'article 293B du CGI" (VAT not applicable, in accordance with article 293B of the CGI) from their invoices, and indicate their intra-Community VAT number. In addition, you'll need to indicate the VAT rate applied and its amount, as well as the price excluding VAT and the price including VAT.
The current standard rate is 20%, but some companies, depending on their activity, can apply reduced rates (10%, 5.5% and 2.1%). It's a good idea to find out.
In addition, some goods and services are excluded from the right to deduct VAT, such as gasoline, car maintenance and housing expenses for the manager.
Receipts are authorized as proof of purchase up to €150. Beyond that amount, an invoice is required to be deductible.
All these regulations require a certain amount of accounting and tax knowledge, which is easy to acquire with a minimum of training.