Unlike companies liable for VAT, which obtain an intra-Community VAT number as soon as they are set up, companies that are not liable for VAT must apply in writing to their local business tax office (Service des Impôts des Entreprises - SIE). They may need this number to carry out certain operations.
VAT: how does it work for businesses?
Value-added tax, or VAT, is an indirect tax paid by consumers on goods and services. It is collected by companies, which must then pay it to the State by declaring it to the tax authorities.
To ensure that VAT is not paid twice on the same product, companies deduct the VAT previously paid on their business purchases from the VAT collected. At the end of the chain, the final consumer is the only one to pay this indirect tax.
The VAT rate in mainland France is 20% for most goods, but there are exceptions for certain categories of goods or services.
The press and medicines reimbursed by the social security system benefit from a reduced VAT rate of 2.1%. Basic necessities, such as equipment and services for the disabled, electricity and gas subscriptions and food products, are subject to a 5.5% VAT rate.
Last but not least, several sectors benefit from a 10% VAT rate: these include catering, accommodation and transport, as well as personal assistance services and work on residential premises.
What are the different VAT tax regimes for businesses?
There are 3 VAT tax systems for businesses: the basic exemption system, the simplified actual system and the normal actual system.
The basic exemption system
The basic tax exemption applies to companies with sales of up to €33,200 for services, and €82,800 for sales of goods and the provision of accommodation.
Companies benefiting from the "franchise en base" system are therefore not concerned by VAT, but they can choose to collect it in order to be able to make deductions. To do so, they must apply for an intra-Community VAT number.
Simplified real-estate regime
The simplified scheme applies to companies with annual sales of between €33,200 and €238,000 for services, and between €82,800 and €789,000 for trade and accommodation. Annual VAT must also be less than 15,000 euros.
For companies subject to the simplified actual tax regime, only one VAT return per year is required, and payment is made in two instalments: the first in July, and the second in December.
The normal actual regime
Businesses subject to the normal sales tax regime are those with annual sales in excess of 238,000 euros for services, or 789,000 euros for trade and accommodation. Businesses whose annual VAT collection exceeds 15,000 euros are also subject to the normal sales tax regime.
They must declare and pay VAT to the tax authorities every month.
What is an intra-Community VAT number?
The intra-Community VAT number is an individual identification number issued by the tax authorities to any company subject to VAT. It is assigned when the company is set up.
However, companies operating under the basic VAT exemption scheme, and therefore not subject to VAT, may wish to collect VAT in order to make deductions, or may need an intra-Community VAT number to supply or purchase goods or services from companies based in other EU countries.
In the case of the supply or purchase of goods within the European Union, the intra-Community VAT number is only required if the total value of transactions exceeds 10,000 euros per year. In the case of services, on the other hand, the VAT number is mandatory, regardless of the value of the transaction.
The intra-Community VAT number must appear on all invoices, trade declarations and VAT returns.
Applying for an intra-Community VAT number
VAT-registered companies automatically receive their intra-Community VAT number, without having to take any special steps. The number also appears on their VAT returns. It is sent to them by the company tax department (SIE) to which they are attached.
Companies that are not subject to VAT must send a letter requesting intra-Community VAT to their local business tax office. This letter can be sent by post to the SIE, or by e-mail via the secure messaging system on the Impots.gouv.fr website.
Please note: once the intra-Community VAT number has been issued by the tax authorities, the company applying for it is subject to a number of obligations. In particular, it must declare the amount of VAT collected each month or each year (the figure may be zero, but the declaration is compulsory), depending on whether it opts for the normal or simplified actual system.
Businesses that are not subject to VAT and may need to apply for an intra-Community VAT number include micro-businesses, which benefit from the basic VAT exemption scheme, and farms, which are subject to the agricultural flat-rate refund scheme.
An online VAT number verification service is available to ensure that the number is valid and that the company to which it has been assigned is trustworthy.