VAT France

How to register for VAT in France: A step-by-step guide

Have you ever wondered how VAT works in France and why it’s a significant part of its tax system? What makes VAT crucial for businesses operating in France? VAT, or Value Added Tax, is a vital source of revenue for the French government, generating approximately 157 billion euros in 2014 alone. This tax is added at each stage of a product’s production and distribution, ultimately paid by the final consumer. In this blog post, we will learn about the importance of VAT, the historical context, and the steps businesses need to take for VAT registration and compliance.

What is VAT?

Value Added Tax (VAT) is an indirect tax imposed on the consumption of goods and services at each stage of production and distribution. Unlike direct taxes, which are paid directly by individuals or businesses to the government, VAT is collected by businesses on behalf of the government and ultimately passed on to the consumer. The tax is added incrementally as a product moves through the supply chain—from raw material suppliers to manufacturers, wholesalers, and retailers—before reaching the final buyer.

The concept of VAT was first introduced in France in 1954 as a way to modernize the tax system and improve revenue collection. By 1968, it had been expanded to cover the entire French economy, setting a precedent for other nations. Today, VAT is one of the most widely used taxation systems globally, adopted by more than 160 countries, including those in the European Union, Canada, China, and India. However, the United States does not implement a national VAT system, instead relying primarily on state and local sales taxes to generate revenue.

VAT in France

VAT is not just a tax; it’s a crucial source of revenue for the French government. It represents nearly half of the state’s income, making VAT more significant than income tax, which contributes less than a quarter of France’s tax revenue. This tax funds essential public services, including healthcare, education, and infrastructure development. By ensuring businesses comply with VAT regulations, France can maintain its robust social welfare system and invest in future growth and development. Your VAT payments play a substantial role in maintaining the country’s financial health and supporting the well-being of its citizens.

Who pays VAT?

The final consumer is responsible for paying Value Added Tax (VAT), as it is incorporated into the price of goods and services at the point of purchase. This means that while businesses handle VAT transactions, the actual financial burden falls on consumers. Businesses function as intermediaries, collecting VAT from customers and subsequently remitting it to the French National Treasury. Since VAT is applied at multiple stages of production and distribution, each business in the supply chain charges and pays VAT on its sales and purchases. However, they can typically reclaim the VAT paid on business expenses, ensuring that only the final consumer bears the full tax cost. This system enhances tax transparency and minimizes evasion, making VAT one of the most efficient forms of taxation worldwide.

Why do companies need to register for VAT in France?

Businesses operating in France must register for Value Added Tax (VAT) not only to comply with legal requirements and avoid penalties but also to gain significant financial and strategic advantages. Compliance ensures that companies adhere to tax regulations, preventing fines, legal issues, or operational disruptions. However, beyond fulfilling obligations, VAT registration allows businesses to reclaim the VAT paid on purchases, reducing costs and improving cash flow. This mechanism is particularly beneficial for companies dealing with high expenditures on goods and services.

Moreover, VAT registration facilitates seamless trade within the European Union (EU). Since the EU operates under a harmonized VAT framework, registered businesses can conduct cross-border transactions more efficiently, avoiding unnecessary tax complications and benefiting from intra-EU trade simplifications. Additionally, a VAT-registered business gains credibility and trust among consumers and partners, as transparency in tax compliance fosters confidence. This is especially important for companies aiming to expand their market presence and build a reputable brand.

Furthermore, proper VAT compliance contributes to better financial management and operational efficiency. By maintaining accurate records of VAT transactions, businesses can streamline accounting processes, reduce errors, and enhance overall financial planning. In turn, this leads to more informed decision-making, helping companies optimize their tax strategies and business operations.

Steps involved in registering for VAT in France.

It involves the following steps to register for VAT in France.

Step 1. Determine if you need to register

It is essential to ascertain whether your company meets the registration requirements before starting the French VAT registration process. The requirements differ based on the nature of the business and its location, whether local or foreign.

Thresholds for local companies

Local companies in France must register for VAT if their annual turnover exceeds specific thresholds: €85,800 for goods and €34,400 for services. These thresholds ensure smaller businesses are not overwhelmed with VAT compliance unless they reach significant sales volumes. 

Requirements for foreign companies

Foreign companies providing goods or services in France must register for VAT regardless of turnover. This includes companies selling directly to French consumers, offering services in France, or running e-commerce platforms. Non-EU companies must appoint a fiscal representative in France to handle VAT compliance.

Special cases

Certain transactions have specific VAT rules. For instance, distance-selling companies must register if annual sales to French consumers exceed €10,000. Distance selling refers to selling goods to consumers in France from another EU country without a physical presence in France. Businesses providing digital services to French consumers must register for VAT and comply with the EU’s One Stop Shop (OSS).

Step 2. Gather necessary information

Once you determine that your business needs to register for VAT in France, gathering the necessary information and documentation is crucial to streamline the registration process and avoid delays. By preparing all the required information and documentation ahead of time, you can simplify the VAT registration process and avoid potential delays or complications. Here’s what you need. To gather.

Business details

You will need to provide specific details about your business. This includes the registered name of your company, which should match the name on your official business documents. Additionally, you must provide the physical address of your business, including any branches or offices. Contact information, such as a phone number and email address, is also necessary for correspondence with the French tax authorities. 

Legal structure

Understanding and documenting your business’s legal structure is essential. Specify whether your business is a sole proprietorship, partnership, limited liability company, or corporation. To validate your business’s legal status, you must supply copies of your registration documents, such as the business registration certificate, articles of incorporation, or partnership agreement.

Financial information

Accurate financial information is crucial for the VAT registration process. You must provide the details of your bank account where any VAT refunds will be deposited. Additionally, documentation of your annual turnover is required to verify that your business meets the VAT registration thresholds. This financial transparency ensures that your business complies with French tax laws.

Identification numbers

If your business is already registered in France, you will need your SIRET number, a unique business identifier. If you do not have a SIRET number, you must obtain one during registration. For foreign companies, providing the VAT identification number from your home country, if applicable, is necessary to ensure proper tax documentation and compliance. 

Description of business activities

It is crucial to provide a comprehensive description of your business activities, including a detailed overview of the goods and services offered by your business. If your company is involved in importing or exporting goods, it is essential to include information about your supply chain, such as details about suppliers, clients, and logistics. This information helps tax authorities understand the nature of your business and its operations. 

Tax representative (for foreign companies)

Foreign companies, especially those outside the European Union, must appoint a fiscal representative in France. This representative handles your VAT obligations and ensures compliance with French VAT regulations. Provide your fiscal representative’s name, address, and contact information to facilitate communication with the French tax authorities. 

Steps to gather information

Review your business records to gather all relevant documents, including financial statements, registration certificates, and any previous tax filings.

Consulting with a tax advisor or legal expert specialising in French VAT law can offer guidance and ensure you have all the necessary information.

Finally, organise all your documents in a single file or digital folder. This organisation will make accessing and submitting the documents easier when completing the registration forms, ensuring a smooth and efficient registration process. 

Step 3. Obtain a SIRET number

One of the essential steps in registering for VAT in France is obtaining a SIRET number.

What is a SIRET number?

A SIRET (Système d’Identification du Répertoire des Établissements) number is a unique 14-digit identifier assigned to businesses operating in France. It consists of two key components: a 9-digit SIREN (Système d’Identification du Répertoire des Entreprises) number, which identifies the company as a whole, and a 5-digit NIC (Numéro Interne de Classement) code, which specifies the individual establishment or branch.

This number plays a vital role in administrative, legal, and financial operations. It is required for essential business activities such as VAT registration, tax filings, invoicing, social security contributions, and business contracts. The SIRET number also helps government agencies track and regulate businesses, ensuring compliance with tax and labor laws.

Since a company can have multiple establishments, each location is assigned a unique SIRET number under the same SIREN identifier. This allows for precise monitoring of various business sites while maintaining a centralized company record. Whether a business is a sole proprietorship, partnership, or corporation, obtaining a SIRET number is a fundamental step in establishing a legitimate presence in France.

How to obtain a SIRET number?

To get a SIRET number, register with the French Register of Commerce and Companies (RCS) for commercial activities or the Chamber of Trades and Crafts for craft businesses. Provide proof of identity, address, business registration documents, and initial financial statements. Once registered, the National Institute of Statistics and Economic Studies (INSEE) issues the SIRET number within a few days to a few weeks.

Many businesses prefer to handle this process online for convenience. The Infogreffe website provides an online platform to submit your application, upload the necessary documents, and track your registration progress.

Step 4: Complete the VAT registration form

After obtaining your SIRET number, you must complete the VAT registration form, “Formulaire de Déclaration d’Exercice,” with accurate information.

Where to Find the Form

The VAT registration form can be easily accessed online from the official French tax authority website (impots.gouv.fr). Alternatively, you can visit your local tax office, Service des Impôts des Entreprises, to obtain a physical copy of the form. Both methods ensure you get the correct form.

Information Required on the Form

The form requires detailed information about your business, including the SIRET number, company name and address, and legal structure. You must also provide financial details such as annual turnover and bank account information, a description of your business activities, and contact details for the primary contact person and any fiscal representative.

Steps to Complete the Form

To complete the VAT registration form, first download or collect it. Fill in all required fields with accurate information, attach supporting documents, and carefully review everything for errors. Once verified, submit the form and documents to the appropriate French tax authorities in person, by mail, or online.

Confirmation of submission

After submitting your application, expect to receive an acknowledgement from the tax office. Depending on the submission method, this could be an email, a letter, or an online confirmation.

If you are still waiting to receive confirmation within a few days to a couple of weeks, contact the tax office to confirm receipt and processing status.

Processing time

The typical processing time for VAT registration is a few weeks, during which the tax authorities will review and verify your application details.

For urgent business needs, inquire with the tax office about expedited processing options and specific requirements to speed up your application.

Step 5: Receive your VAT number

Once your application is approved, the tax authorities will issue your VAT number, which you will receive via email, mail, or the online portal. 

• The French VAT number typically starts with “FR” followed by two check digits and your SIRET number (e.g., FRXX12345678901). 
• To ensure compliance, you should immediately use this number on invoices, official documents, and any VAT-related activities. 
• Record the VAT number in your accounting and business management systems, update templates, and notify customers, suppliers, and partners.

What are the post-registration obligations for VAT in France?

After registering for VAT in France, your business must adhere to ongoing obligations to comply with French VAT regulations. These include filing regular VAT returns, usually monthly or quarterly, detailing all VAT charged and paid. Accurate record-keeping for at least six years is essential, and electronic records are encouraged. Familiarise yourself with applicable VAT rates (20%, 10%, 5.5%, 2.1%) and stay updated on regulatory changes. Additionally, businesses trading within the EU must submit Intrastat declarations if thresholds are met and an EC Sales List for intra-EU sales. Compliance ensures smooth operations and avoids penalties.

Common Pitfalls and Tips for Registering for VAT in France

Avoiding common pitfalls in VAT registration and compliance in France is crucial for smooth business operations. Here’s how you can sidestep these issues:

Incomplete Documentation

Ensure all paperwork is complete and accurate. Double-check all required documents before submission to ensure a timely registration process.

Missed deadlines

Mark all vital filing and payment deadlines on your calendar and set reminders. Timely submissions are essential to avoid significant penalties.

Incorrect VAT rates

Familiarise yourself with the correct VAT rates for your products or services. Applying the correct rates is critical to avoid compliance issues.

Neglecting updates

Stay informed about changes in VAT laws and regulations. Check updates from the French tax authorities regularly and subscribe to newsletters or updates to remain compliant.

Tips to avoid the pitfalls while registering for VAT in France

Consult a tax advisor.

Engaging a tax advisor with expertise in French VAT laws can provide invaluable assistance and ensure your business complies with all regulations.

Keep detailed records

French law requires you to maintain comprehensive records of all transactions for at least six years. This practice ensures you can provide necessary documentation during audits.

Use digital tools

Utilise accounting software to automate VAT calculations and streamline the filing process. Digital tools can help manage your VAT obligations more efficiently.

Stay informed

Check updates from the French tax authorities regularly. Staying informed about changes in VAT regulations will help you adapt quickly and maintain compliance.

FAQs

Is VAT 20% in France?

Yes, the standard VAT rate in France is 20%.

What is the French VAT price?

The French VAT rate is typically 20%, but there are reduced rates for certain goods and services. For example:

• 10% for certain services like restaurants and transport.
• 5.5% for most food products, books, and some entertainment events.
• 2.1% for certain medications and press publications.

How much is a VAT refund in France?

VAT refunds are available for non-EU residents for goods purchased in France and exported back to the non-EU country. Typically, the refund amount can be up to the VAT paid minus a handling fee charged by the refund service provider, which can be around 10-15%.

What is the 3% tax in France?

The 3% tax in France is a surtax levied on certain large corporations. It applies to distributions made by large companies.

What is the 75% tax in France?

The 75% tax in France was a controversial tax on income over 1 million euros, introduced by President françois Hollande. This tax was intended as a temporary measure and applied to high-income earners. It has since been abolished.