Ready to expand your market reach to France as an online seller? Understand the intricacies of French VAT when you have buyers in the country to eliminate costly oversights.
A Guide to French VAT for E-Commerce Entrepreneurs
As one of the largest countries in the European Union (EU), it’s no surprise that France has a large market of over 65 million consumers. Tapping into this opportunity with the right product is financially rewarding for sellers on Amazon, Etsy, eBay, and other e-commerce platforms.
But before doing business, you must first know what French VAT is and how to comply with it. Failure to do so often leads to financial losses. Avoid the risks with our guide outlining the specifics of VAT in France.
1. VAT Registration Is Required for Distance Sellers
Most foreign businesses must register for French VAT, a policy following the EU’s broad directives. Among the activities mandating registration is selling to French consumers via the internet, catalogues, etc.
Besides distance selling, a foreign company must register for VAT with the tax authorities if they stock goods in consignment warehouses in France. For example, Amazon sellers under the FBA arrangement target buyers within the EU.
Keep in mind that EU-based e-commerce sellers have to be VAT-registered as well. There used to be a country-specific threshold to obtain a VAT number—in France, this rule applied to those with an annual turnover exceeding €35,000.
But with the EU’s revised rules on cross-border sales implemented on 1 July 2021, there is only one standard turnover threshold of €10,000 applicable across member-states within the trading bloc.
Whether you’re a foreign or EU-based online retailer, it’s best to register for French VAT before trading taxable goods to reduce the risk of non-compliance.
2. VAT Registration Under the IOSS
Another change in the EU’s VAT rules for e-commerce sales was the Import One Stop Shop (IOSS), a platform that simplifies VAT compliance for non-EU online retailers. Under the system, a seller can register on the website, get a unique identifier number, and remit collected VAT on sales made throughout the EU.
The platform also ensures that the correct VAT amount gets credited to the right EU member state, greatly improving tax collection and revenues. As for the sellers, they benefit from reduced compliance costs, easier reclaiming of VAT on refunds, and removal of import VAT payments.
E-commerce sellers can only use the IOSS for VAT obligations on goods with consignment values of €150 and below and are not subject to excise duty. If you exceed the €150 threshold, you must collect and remit VAT outside the platform.
3. Prepare the Documentary Requirements for Registration
Ideally, you should register for French VAT before doing business in the country as part of compliance. There is no penalty for late registration, but tax authorities can levy high interest on unpaid VAT due or delayed VAT payments.
Moreover, you cannot register retroactively; however, it is possible to backdate it in reasonable circumstances, such as when a business intends to correct its status.
To register, you must submit an application form to the Service des Impôts des Entreprises, along with the following requirements:
- A copy of the Articles of Association or Incorporation
- An excerpt from your business’ trade register
- VAT certificate if registered elsewhere in the EU
- Original authorisation document, such as power of attorney, if done through a fiscal representative or agent
If you need help registering for French VAT, work with Sterlinx Global. We will take the burden from you so that you can focus on expanding your reach in France.
4. Fiscal Representation Depends on Your Location
As with most countries, foreign companies don’t have to establish a local presence to be VAT-registered. However, you may need to register through a tax representative. The rule depends on where your business is based.
Non-EU e-commerce sellers, except those based in the UK and other jurisdictions under a mutual assistance agreement with France, are obligated to have fiscal representation. But even if an agent isn’t mandatory, it’s best to hire one to speed up and simplify your VAT number application.
5. All Imported Goods Are VATable
Before the revised EU VAT rules were implemented in 2021, imported products with less than €22 intrinsic value were VAT-exempt. However, foreign e-commerce sellers abused this rule to get ahead of their EU competitors. They undervalue and mislabel the goods to avoid levying VAT, allowing them to sell at lower prices.
The EU removed this exemption for consigned goods to stop non-EU retailers from undercutting the competition, prevent fraud, and ensure revenue collection.
6. Know the Different French VAT Rates
EU member states like France base their tax legislation on EU VAT directives. Under the guidelines, the minimum standard rate is 15%. Currently, the French VAT rate stands at 20%, which is charged on most goods and services.
Aside from the standard rate, three reduced rates—10%, 5.5%, and 2.1%—are applied to particular product and service categories. When you’re VAT-registered, it’s your responsibility to know the correct VAT rate and tax due for your sold goods.
7. You Have VAT Obligations
Being registered for French VAT means you have obligations to the tax authorities. Part of your compliance is to remit the collected VAT from your online sales and file the corresponding returns.
You must complete and submit monthly returns for your VAT liabilities. Unless your annual amount of VAT due is less than €4,000, in which case you have to file quarterly returns.
VAT returns should be submitted between the 15th and 24th of the month following the covered period and filed electronically. Moreover, the exact filing date depends on your VAT number.
Keep in mind that your VAT liability must also be settled upon return filing. If you fail to meet the deadline, expect to pay the following penalties:
- Late return submission: 10% of the tax due
- Late payment: 5% of the VAT liability + 0.4% interest per month
- First formal notice of late submission: 40% of the tax due
Since electronic filing and payment are mandatory, failure to do either will result in fines amounting to 0.2% of the VAT due.
8. VAT Compliance Is Complicated
Meeting your obligations as an e-commerce seller registered for French VAT can be overwhelming, especially when trading in multiple EU markets simultaneously. Reduce the risks of non-compliance and lessen business disruptions with the assistance of tax experts.
Let us at Sterlinx take the heavy work so you can better use your time and resources instead of worrying over tax audits and hefty fines for oversights.
Frequently Asked Questions
How long does VAT registration in France take?
Getting your unique French VAT number normally takes between 4 and 6 weeks, but there are instances when the processing period may take longer. Moreover, you should also put aside enough time to prepare your documents and have them translated if required. Factor these considerations in before doing business.
Can I register for French VAT by myself?
It depends on whether your business is based in a jurisdiction where a tax agent is required. When you appoint a fiscal representative, they will transact with the French tax authorities on your behalf. Even if representation is optional, it is advisable and cost-efficient.
Is it better to leave VAT computation to professionals?
While you can calculate your VAT liabilities yourself, this task is time-consuming and prone to mistakes. French tax authorities will penalise erroneous payments and returns, so oversights can cost your business. When you work with us, we can guarantee accuracy.
Doing business as an e-commerce seller in France opens up many opportunities with its immense potential market. However, it’s critical to understand how French VAT works on distance selling whether you’re a non-EU- or EU-based company.
Stay on top of your VAT compliance in France or any other EU member state with Sterlinx Global. We are ready to assist you from registration to returns filing. If you have more questions, check out our tax community forum, podcasts, and e-commerce videos.