Import VAT reverse charge mechanism will mandatorily declare in the French VAT returns. It will start from January 2022.
The French tax authority announced that all import tax payer will be compulsorily declare import goods under reverse charge mechanism. The French VAT return based on the reverse collection mechanism. This means that taxpayers do not need to pay import VAT in advance at the customs. But it can directly declare in the VAT declaration form. Which is declare as payable and deductible in the same declaration form. So the impact of VAT is zero. This is a huge cash flow advantage. They do not have to pre-pay VAT at customs .
How France reverse charge mechanism currently work
Currently, French VAT registered companies need to request specific authorisations issued by the DGDDI (The General Directorate of Customs and Indirect Taxes) to reverse charge the import VAT.
A company applying for this authorization must meet the following conditions:
- The company must have performed at least 4 importations of goods to the EU within the last 12 months.
- All non-EU companies must appoint a customs broker with the AEO status.
- A reliable booking-system to record all import information.
- Not have made any serious or repeated offences to the tax and customs regulation within the past 12 months.
How are VAT returns affected in France
From 1st of January 2022 all these conditions will not necessary to meet. The reverse charge mechanism will become automated.
French VAT returns will adjust to promote the application of the new measures. Please see the following major updates:
- On the 14th day of each month, the VAT return will show the pre-filled import VAT amount. It base on the amount previously reported to the customs authority.
- For taxpayers importing in France, the deadline for submitting VAT returns will move to the 24th of the next month.
- The customs authority (douane.gouv.fr) will provide a service to check the details of the pre-filled import VAT amount. It will show on the VAT return.
Import VAT pre-filled items must review by the taxpayer. It can modify if necessary. Also, it is the taxpayer’s responsibility to obtain relevant import documents before verifying the pre-filled amounts. It will complete these amounts when necessary.
For the non-EU established taxpayers, the conditions will assume to meet as soon as their Customs representative as Authorised Economic Operator is recognized. Then the businesses will allow to report import VAT in their VAT returns rather than physically from the tax authorities.
Who will be affected by the reverse levy of French import VAT?
This simplification will be mandatory for all companies that have a valid intra-community VAT number in France and import in that country.
If you do not have a intra- community VAT number and you are importing in France. Then you need to apply for VAT registration.
Special attention should be paid to the following scenarios:
- If you are subject to the simplified VAT system (régime simplifié d’imposition or RSI) and you are importing in France. You need to notify your tax office to switch to the regular VAT system (regime réel normal). Since this update is mandatory, RSI no longer applies to your business.
- If you implement a VAT franchise system(régime de authority en base de TVA) in France. The import goods must report in the VAT return.
- If you are now a customs and VAT warehouse (régimes fiscaux suspensifs (RFS). The tax authority will be the main contact (DGFiP). Therefore, when clearing goods from customs and VAT warehouses. The tax base-taxable or not, will be declared in the VAT return (information is not pre-filled).