FRANCE: COVID-19 VAT IMPLICATIONS

Apr 1, 2020 | VAT Updates

FRANCE – Update 28th May

Official bulletin on the application of the reduced VAT rate on PPE’s – importer to issue a rectificative return and to ask for the reimbursement of the import VAT

A highlight:

  • There is no need to claim for rectifying invoices
  • However for imports : the importer needs to issue a rectificative return and then asks for the reimbursement of the import VAT

 

Source Credit – mpots.gouv.fr

 

FRANCE/GERMANY – Update 27th May

COVID-19 Pandemic: Emergency Tax Measure

Germany and France Sign Agreement on Taxation of Frontier Workers Germany and France signed an agreement on the taxation of frontier workers who are currently e-working at home due to the COVID-19 pandemic.

The mutual agreement stipulates that, for purposes of the application of Article 13(1) of the France – Germany Income and Capital Tax Agreement (1959) (as amended through 2015), days spent working from home due to COVID-19 pandemic measures will be deemed to be spent in the state where the frontier workers would have carried out the work without the current COVID-19 pandemic measures.

This rule will not be applicable to working days which would have been spent in the home office anyway or in third countries, in particular if working from home is part of the respective contractual labour agreements. The mutual agreement further stipulates that concerned frontier workers intending to make use of the mutual agreement are obliged to collect relevant evidence, i.e. a statement by the employer about the days spent in home office due to the COVID-19 pandemic. The fiction provided for by the mutual agreement will only be effective to the extent that the relevant employment remuneration concerning the days spent in a home office are effectively taxed by the work state where the work would have been carried out without the current COVID-19 pandemic measures.

Frontier workers making use of the mutual agreement thus consent to taxation of the respective employment remuneration in the work state. Such employment remuneration is deemed to have been effectively taxed if the amount is being taken into account when determining the taxable basis.

The mutual agreement further notes that the application of the frontier worker provision contained in Article 13(5) of the treaty is not affected by the current COVID-19 pandemic measures due to a previous mutual agreement signed in 2006. In addition, the competent authorities agree that, for purposes of interpreting the treaty, payments under statutory social insurance schemes, e.g. the payment of reduced hours compensation benefit (Kurzarbeitergeld) in Germany and similar payments in France (chômage partiel), shall be taxable only in the state of residence of the recipient.

The mutual agreement will be applicable to working days during the period between 11 March 2020 and 31 May 2020 and is automatically extended until the end of the following calendar month, provided that the agreement is not terminated by one of the competent authorities at least 1 week before the end of a given following calendar month. The agreement was signed on 13 May 2020 (IV B 3- S 1301-FRA/19/10018:007, DOK 2020/ 0503105) and entered into force on 14 May 2020.

 

Source Credit – IBFD

 

FRANCE – Update 25th May

Monaco Extends 13th Directive VAT Deadline by 3 months

The Monaco VAT Authority (Direction des ServicesFiscaux) confirmed that they will be granting an extension to the 13th Directive VAT deadline by 3 months to 30 September 2020.

Monaco is following in the French Authority’s footsteps who also recently provided an extension on the same directive deadline. The original 13th directive deadline is 30 June 2020 for all VAT incurred on 2019 expenses. However, this deadline has been pushed to 30 September 2020.

The extension has been granted as a result of the COVID-19 pandemic and hopes to ease the pressure off non-European businesses who may be struggling to ready their claims for submission while working remotely and in isolation.

 

Source Credit – VATit

FRANCE – Update 25th May

COVID-19: PDF / Scanned paper invoice accepted as electronic invoice

Under French law, there is no recognition of the validity of the scanned copy of a paper invoice, nor of a simple PDF invoice, unless proper reliable audit trail is put in place. For an invoice to be an electronic invoice, the entire invoicing process must be electronic. Moreover, an electronic invoice is valid only in the case of (i) a certified electronic signature or (ii) the implementation of an electronic information exchange (i.e. EDI).

However, the French tax authorities has just specified in a note dated 30 March 2020 that, during the COVID-19 period only“it is allowed, including for the purpose of the recovery of input VAT, that invoice issued in paper form and then scanned, is sent by mail by any supplier to its customer without the need to send the by post corresponding paper invoice”.

In addition, this note also allows the customer, during the containment period only, to store under PDF format the scanned invoice received by email. At the end of this period, it will be liable to store the said invoice by printing it, or scanning it in accordance with the specific provisions of article A. 102 B-2 of the LPF (i.e. PDF format accompanied by a server stamp, a digital fingerprint, an electronic signature or any equivalent secure device).

In other words:

  • For the containment period, the scanned paper invoice is now accepted.
  • At the end of the containment period, the scanner invoice received during the containment should be stored under printed version, or under electronic format provided that specifics requirement are met.

In practice, it seems useful to take into account the following elements:

  • Be particularly vigilant about the risk of duplication, especially if suppliers decide to subsequently send the paper invoice by post;
  • Be careful about the storage duty that should be respected at the end of the containment;
  • It is still mandatory to draft a procedural note that would serve as a “reliable audit trail”to cover this period (in case of a future tax audit).

In addition, it will be advisable to set up a very strict procedure of follow-up of the suppliers, in particular by updating the data of the file suppliers such as:

  • updated KBIS
  • up to date Bank account data

 

Source Credit – arsene-taxand

 

FRANCE – Update 20th May

Order on Reduced VAT Rate for Protective Mask and Personal Hygiene Products

France has published the Order of 7 May 2020 regarding the application of the reduced VAT rate to protective masks and personal hygiene products suitable for combating the spread of the COVID-19 virus. The VAT rate for these products was reduced to 5.5% until 31 December 2021 as part of the Amending Finance Law for 2020.

The Order defines the characteristics of protective masks and personal hygiene products that qualify for the reduced rate and applies to deliveries of goods and intra-Community acquisitions made since 24 March 2020, in the case of masks, and since 1 March 2020, in the case of personal hygiene products. It also applies to imports of masks and personal hygiene products made from 26 April 2020.

Note – The reduced rate also applies for protective clothing for COVID-19 from the same dates as for masks, although the order does not cover this. A separate order regarding protective clothing is expected.

 

Source Credit – Orbitax

 

FRANCE – Update 12th May

Accelerated reimbursement for corporate tax and VAT

Unofficial translation

As part of the assistance measures put in place by the government to support companies in the midst of the Covid-19 crisis, they can benefit from an accelerated reimbursement of the corporate tax credit refundable in 2020 and the credit of VAT.

With regard to the tax credit, businesses need only go to their professional space at taxes.gouv.fr to remotely declare their refund request as well as the declaration allowing them to justify the tax credit. Regarding the VAT credit, the company must make its request electronically.

 

Source Credit – Option Finance

 

FRANCE – Update 7th May

VAT rate reduction on certain products needed for the fight against Covid-19

In the frame of the Covid-19 in France, the French tax authorities have taken additional measures for decreasing the VAT rates on certain products needed for the fight against Covid-19, implemented by the amending Finance Bill for 2020. The decrees of the Ministers responsible for Health and the Budget have not yet been published but it will, in principle, provide more details in the coming days.

1. Products concerned by the decrease of the VAT rate

Articles 5 and 6 of the 2nd amended Finance Bill for 2020, published on April 26th, 2020, provide for a decrease of the VAT rate to 5.5% for the following products – a particular attention should be done on the retroactivity of this measure:

  • Masks and protective clothing suitable for combating the covid-19 for the period from March 24th, 2020 to December 31st, 2021 (new article 278-0 bis K bis of the FTC) => a priori, this will concern : respiratory protection masks (FFP) type FFP2, FFP3, N95, N99, N100, R95, R99, R100, masks for medical use according to standard EN 14683; masks dedicated for non-sanitary uses; the masks that will be developed for the use of the general public (compulsory wearing) – to be confirmed by decree in the coming days
  • Products intended for personal hygiene and adapted to the fight against the spread of the covid-19 for the period from March 1st, 2020 to December 31st, 2021 (new article 278-0 bis K ter of the FTC) => a priori, this will concern : hydro-alcoholic gels ; hairnets / charlotte, blouses – to be confirmed by decree in the coming days

Even if the text is not clear cut, the decrease of the VAT rate will concern the sales of goods located in France (according to VAT territoriality rules) or Intra-EU acquisitions of goods (for which French VAT is reverse charged).

Even if it is not expressly mentioned, the importations of those products should be concerned by the measure of the decrease of the VAT rate. However, we understand that the retroactivity should not be applied and the 5,5% VAT rate applies as from the publication of the law (i.e., as from April 26th)

2. Modification of the regulated prices for hydro-alcoholic gels and masks for single use

The regulated prices have been modified for hydro-alcoholic gels by a new decree published on April 26th, 2020 (Decree n° 2020-477) and are applicable immediately.

Concerning the masks for single use, a new decree published on May 2nd, 2020 (Decree n° 2020-506) states the new regulated prices (e.g., 95 cts, including taxes per mask).

3. Impacts of the retroactivity on the sales already performed

Due to the retroactive effect of the measure, some impacts must be anticipated for the period from March 1st, or March 24th, to the date of the publication of the Law in April 26th, 2020, (1) depending the products concerned and (2) the contractual relations with the customers (B2B or B2C).

 

Source Credit – Nathalie Habibou – (Partner – Arsene Taxand)

 

FRANCE – Update 5th May

Reduced rate of 5,5% is now applicable to intra-Community acquisitions of certain protective equipment and personal hygiene products

The government is adjusting the VAT rules in an attempt to limit the price of certain equipment and personal hygiene products essential in the fight against Covid 19. Here, VAT finds its social and economic role.

Thus, the Amending Finance Law for 2020 published in the official journal on April 26, 2020 provides for a temporary application of the reduced VAT rate of 5.5% ( provided for in article 278-0 bis, K bis and K ter of the CGI ) , instead of the 20% rate, for intra-Community deliveries and acquisitions of the following products:

  • The masks and protective clothing suitable for combating the spread of the covid-19 virus, the list and technical characteristics of which will be fixed by joint decree of the ministers of health and the budget. The reduced rate applies retroactively from March 24, 2020
  • Products intended for personal hygiene and suitable for combating the spread of the covid-19 virus, the characteristics of which will be fixed by joint order of the ministers responsible for the budget and the environment. The reduced rate applies retroactively from 1 st March 2020.

The reduced rate of VAT will be applicable until December 31, 2021.

As the application dates are retroactive, taxable persons will have to draw the consequences at their level.

 

Source Credit – taj-strategie.fr

 

 

FRANCE – Update 29th April

Tax authorities propose new practical arrangements for businesses facing difficulties

Further to a letter dated 2 April 2020 sent to the French organization MEDEF (representing French businesses), the French administration published practical solutions for the filing of the next VAT returns for companies facing difficulties during the Covid-19 crisis on its website.

For businesses that may face critical issues in gathering all the relevant supporting documentation, the French administration specifies that they are allowed to apply the so-called “tolerance applicable during holidays”. This tolerance makes it possible to pay only an instalment of 80% of the sum due under the responsibility of the company. As a reminder, the acceptable margin of error is of 20% of VAT actually due. Moreover, for the only businesses having suffered a decrease of their turnover due to Covid-19 crisis, it is exceptionally accepted, during the confinement period, to pay only a VAT installment as follows: For the VAT return of March due in April:

  •  By default, 80% of the amount declared for February or, if an instalment was yet paid for February, 80% of the amount declared for January
  • If the business activity has been stopped since mid-March (total closure) or largely decreasing (estimated to 50% or more): 50% of the amount declared for February or, if an instalment was yet paid for February, 50% of the amount declared in January

 For the VAT return of April due in May:

  • Same arrangements as for the previous month if the confinement period is extended and would not allow an adjustment at that date

 For the regularization VAT return:

  • Adjustment of VAT due for previous months where the instalment methodology has been used, based on accurate figures for those months, with deduction of instalments paid.

 

Source Credit – Deliotte

 

FRANCE – Update 23rd April

 Delay of new exporter of record EU rule changes due to COVID-19

 

Source Credit – Richard Asquith (Avalara)

FRANCE – Update 17th April

Businesses can apply for a tax payment suspension if they provide evidence of them affected by Covid-19. However, at present, it appears that it only applies to direct taxes but could be extended to VAT in due course.

 

Source Credit – Accordance VAT

 FRANCE – Update 17th April

COVID-19: Tracks and solutions to manage your VAT reporting obligations in these troubled times

As part of the various measures implemented in tax and social matters following the COVID-19 epidemic, it has been confirmed on several occasions that the deferral measures (in particular in the area of corporate tax) cannot in no case concern indirect taxes, and therefore VAT. Also, companies are required to meet their declarations and VAT payment deadlines during the health crisis. However, certain measures have been put in place to lighten the burdens of companies encountering proven difficulties.

Gradually, in order to take into account the difficulties encountered by certain companies, measures have been implemented, either formally or informally.

1. Informally, on written request (via the administrator account for filing CA3 declarations), certain companies were able to request the application of the following two measures:

  • Payment schedule for the VAT due for a period. This makes it possible to request the postponement of the deadlines for March and April next (at this stage), without the application of late interest and penalties.
  • Deferral of VAT payments for the VAT due on invoices issued (deliveries of goods or services with the person liable for payment having opted for debits) but not collected by the person liable for payment.

In practice, these possibilities must be accepted by the tax office concerned, and there can be no guarantee that they will be systematically granted.

2. More formally, the DGFiP – in a note dated April 2, 2020 – clarified that:

  • For companies with a drop in their turnover linked to the Covid-19 crisis, it is possible, exceptionally and for the duration of the confinement, to pay a lump sum VAT payment.

Therefore, this measure should therefore apply to transactions carried out for the months of March 2020 and April 2020. In practice, the lump sum deposit can be determined as follows:

  • 80% of the VAT for month M -1 (February or March), or, if the company has already used a deposit the previous month, 80% of the amount declared for month M-2 (January or February). This measure targets businesses in activity but having difficulty in preparing their declarations. – 50% of the VAT for the previous month (February or March), or, if the company has already used a deposit in the previous month, 50% of the amount declared for month M-2 (January or February).

This measure targets companies whose activity has been stopped since mid-March (total closure) or is in very sharp decline (estimated at 50% or more).

Correspondingly, a declaration of regularization must be filed at the end of the confinement. This will include the actual elements drawn from the activity of the months for which a deposit has been paid, after allocation of these.

  • Make use of the administrative tolerance of paid holidays (BOI-TVA-DECLA20-20-10-10 §260) by making an estimate of the VAT due for one month and paying, within the time limit set for the deposit of the declaration, a deposit corresponding to this amount. In principle, a margin of error of 20% will be tolerated by the tax authorities.

In practice, the above measures from this note can be applied by operators, without prior authorization from the tax administration. Nevertheless, care should be taken in their implementation since they will be subject to ex-post controls by the tax administration.

3. Finally, in a press release dated March 22, Gérald Darmanin, Minister of Action and Public Accounts, announced the possibility of requesting expedited processing of requests for reimbursement of VAT credits.

Source Credit – Tourmag

 FRANCE – Update 15th April

Coronavirus and VAT declarations: the administration proposes new practical provisions for companies facing difficulties

Following a letter sent to MEDEF on April 2, the tax administration published practical solutions on its website concerning the filing of future VAT returns for businesses facing difficulties.

The administration distinguishes 2 types of companies concerned.

Firstly, for companies that have difficulty gathering all the useful documents , the administration specifies that it is permissible to apply the so-called “tolerance for paid leave” tolerance. This tolerance makes it possible to pay only a deposit of 80% of the sum due under the responsibility of the company, while recalling that the margin of error tolerated is 20%.

In addition, for the only companies which have experienced a drop in their turnover due to the current crisis, it is possible for them, for the duration of the confinement, and on an exceptional basis, to pay only a flat-rate deposit of VAT. under the following conditions :

For the declaration filed in April for the month of March:

  • By default, fixed price of 80% of the amount declared for February or if the company has already made use of a deposit the previous month, fixed rate of 80% of the amount declared for January
  • If the activity has been stopped since mid-March (total closure) or in a very sharp decline (estimated at 50% or more): flat rate at 50% of the amount declared in respect of February or if the company has already made use of a deposit the previous month forfeited at 50% of the amount declared in respect of January

For the declaration filed in May for the month of April:

  • Identical to the previous month if the confinement period is extended and makes it impossible to declare regularization on this date

For the regularization declaration

  • Adjustment of the VAT due according to the actual elements drawn from the activity over the whole of the previous months settled in the form of installments with allocation of the installments paid.

 

Source Credit – Deliotte

 FRANCE – Update 15th April

No ability to gather VAT documents, declaration system based on an assessment of tax due is implemented

Unofficial translation

VAT and covid-19: no deferral of declaration and payment in France

Despite the very difficult context of Covid-19, the DGFIP recalls that only direct taxes can be subject to deferred payment or possibly remission. Also, no payment deferral or remission of VAT rights can be granted to companies.

However, in the event that the company is unable to gather all the documents useful for establishing its VAT declaration (normal real regime) in the current context of containment, a declaration system based on a assessment of tax due is implemented.

The company can thus:

  • as provided for by Bofip during the holiday period, make a simple estimate of the amount of VAT due for one month and pay the next month a deposit corresponding to this amount. The tolerated margin of error is 20%.
  • for the only companies which have experienced a drop in their turnover linked to the Covid-19 crisis, exceptionally and for the duration of the confinement decided by the authorities, pay a lump sum VAT payment for the April declaration for March as follows:
    • by default, forfeit to 80% of the amount declared in respect of February or, if the company has already made use of a deposit the previous month, forfeit to 80% of the amount declared in respect of January;
    • if the activity has been stopped since mid-March (total closure) or in a very sharp decline (estimated at 50% or more), fixed price at 50% of the amount declared in respect of February or, if the company has already resorted to a down payment the previous month, fixed price at 50% of the amount declared for January.

When paying the deposit for a month, the amount must be mentioned online 5B “Amounts to be added, including holiday deposit” in the gross VAT frame and the “Express mention” frame must be completed keywords “Covid-19 deposit” and the plan used, for example: “80% plan for month M”.

According to the indications given by the administration, this exceptional measure can only be renewed for the month of April if “the confinement period is extended and makes it impossible to declare regularization on this date”.

Regularization:

Unless the confinement period is extended, regularization must take place in May in the declaration subscribed for the month of April. The regularization declaration must include the total of the actual elements for the month of April and the previous month (s) in respect of which the tax was declared in the form of a deposit (March and, if applicable, February). The total amount of deposits paid for the previous months is shown on line “2C” in the “Deductible VAT” frame.

 

Source Credit – Ayming

 FRANCE – Update 10th April

Administration proposes new practical provisions for companies facing difficulties

Following a letter sent to MEDEF on 2 April 2020, the French tax administration published practical solutions on its website concerning the filing of future VAT returns for businesses facing difficulties.

Source Credit – Deliotte

FRANCE – Update 10th April

No regularization of VAT for donation of goods to health and elderly organizations

The French tax authorities clarified the VAT exemption relating to donations of goods made to health establishments, social and medico-social establishments which welcome the elderly, people with disabilities or chronic pathologies, professionals health, at the services of the State and local authorities, during the period of the health emergency.

Source Credit – Official Bulletin of Public Finances

FRANCE – update 7th April

COVID-19: No specific measures, though VAT cash flow incentives are available, some upon request

 In principle, VAT is not concerned by the measures officially implemented by the French government.

However, since VAT can have a cash impact for the companies, case-by-case approaches can be used for VAT purposes :

  1. Payment schedule for the VAT due for a period. It is possible to request a payment schedule to request the postponement of the due dates of February, March and April (at this stage), without application of late interest and penalties.
  2.  Postponement of VAT payments for the VAT due on invoices issued (deliveries of goods or services with taxable person having opted for payment of VAT on an accrual basis) but not collected by the taxable person.
  3.  Payment of a flat-rate amount of VAT for the months of March 2020 and April 2020 (in the event of a prolongation of the confinement making it impossible to declare a regularization on that date):
  • 80% of the VAT for month M-1 (February or March), or, if the company has already made use of an advance payment the previous month, 80% of the amount declared for month M-2 (January or February). This measure concerns companies which are still in business but which are experiencing difficulties in preparing their returns;
  • 50% of the VAT for the previous month (February or March), or, if the business has already made use of a deposit the previous month, 50% of the amount declared for month M-2 (January or February). This measure concerns businesses whose activity has been discontinued since mid-March (total closure) or is in very sharp decline (estimated at 50% or more).  

For information, a return of regularization will have to be filed at the end of the containment. This will include the actual elements drawn from the activity of the months for which a down payment was paid, after deduction of these amounts.

  1. Option to perform an estimation of the VAT due for a month and to pay, within the time limit of the filing of the VAT return, a down payment corresponding to this amount. A margin of error of 20% of the amount actually due is tolerated (BOI-TVA-DECLA-20-20-10-10 n°260).

Based on the first feedback received, the implementation of measures 1 and 2 must be requested in writing through the administrative account portal used for the filing of VAT returns.

Regarding measures 3 and 4, they may therefore be applied by companies and will be subject to a posteriori controls by the tax authorities.

Finally, with regard to VAT refund claims, Gérald Darmanin, Minister of Action and Public Accounts, announced in a press release the possibility of requesting accelerated processing of VAT refund claims by the French Tax authorities (Press Release no. 996, dated March 22, 2020), when they have been correctly completed and do not raise any additional questions from the tax authorities.

 

Source credit – Taxand

FRANCE – Update 31st March

  • Deferrals are granted for all direct tax payments and local taxes.
  • In case deferrals are not sufficient, it is possible to request tax rebates (subject to providing adequate documentation of the situation).
  • VAT returns and payments due for the month of February 2020 will follow the usual deadlines during March 2020.
  • Extension of CIT instalment due on March 15 until June 15 (for all companies, without any condition). If CIT instalment is already paid, a refund may be requested.
  • French tax authorities are committed to accelerating the repayment of outstanding receivables.
  • Monthly payments of local taxes can be suspended.

Source Link here

FRANCE – Update 31st March

  • The French customs administration delayed amendments to the administration’s position regarding exports from France by non-EU companies. The deadline of the new guidelines has been pushed back to 1st October 2020 

Source Link here

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