French Tax Unification Update: Automatic Reverse Charge of Import VAT from January 2022

The DGFiP (Direction Générale des Finances Publiques, or the Treasury Department of the French State) has announced that it will drop administrative requirements of businesses who has reverse charge import VAT accounting from January 1, 2022. This means that the import VAT will have to be self-accounted (i.e., reverse charged) through the periodic French VAT returns. 

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: 

• It has carried out at least four imports into the European Union in the 12 months preceding the application. 
• It has a system for managing their customs and tax records that allows them to monitor imports. 
• It proves that it has not committed any serious or repeated infringements of customs and tax provisions. 
• It demonstrates financial solvency. 

For the non-EU established taxpayers, the conditions are assumed to be met as soon as their Customs representative is AOE (Authorised Economic Operator) recognized. Once granted, businesses will be allowed to report import VAT in their VAT returns rather than physically paying and reclaiming this from the tax authorities. 

However, when the new tax rule comes into force January 1, 2022, the above conditions will no longer apply and the reverse charge mechanism will become automatic. The simplification presents a cashflow advantage for businesses and will save on shipping costs related to the import VAT payments. 

Source: Ministry of Economy and Finance

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