Small Business VAT Thresholds in France
Tuesday 02 June 2015
Micro-entrepreneurs can neither charge nor reclaim VAT, but what happens when the turnover thresholds that grant exemption are exceeded?
France has a system of VAT (Taxe sur la Valeur Ajoutée -TVA) on the supply of goods and services in much the same manner as occurs elsewhere across Europe.
The general rate of TVA for most goods and services is 20%, although lower rates apply for certain goods and services, eg, a rate of 10% applies for restaurants, cafes and hotel accommodation. The tax is, of course, paid entirely by the consumer.
As a general rule VAT is not chargeable on imports and exports intra-business within the EEA, provided the businesses are VAT registered.
A micro-entrepreneur (auto-entrepreneur or micro-entreprise) is exempt from TVA, and is legally obliged to make that declaration on all invoices, with the statement 'TVA non applicable, art. 293 B du CGI.'
Where the turnover limit is exceeded the business is obliged to charge TVA, although it does not happen automatically.
Micro-Entrepreneur Turnover Limits
In order to quality as a micro-entrepreneur there are two basic turnover limits that apply, depending on the nature of your business, as follows:
- Commercial sales and furnished accommodation - €82,200
- Services and activities of the professions libérales - €32,900
These rates apply through to the end of 2016.
If your business is subject to both limits (as applies, for instance, to most builders), then the exemption limit applies for each part of the business.
There are separate rules for an agricultural business and certain other professions, not considered here.
Beyond the basic micro-entrepreneur turnover limits, there exists a further threshold granting continuing status as a micro-entrepreneur and exemption from VAT. These limits are known as the franchise en base or seuil de tolérance.
Under these second tier limits a business that exceeds the basic turnover threshold is granted continuing exemption from VAT for two years provided their turnover does not exceed €90,300 (sales) or €34,900 (services) during this period.
Accordingly, if you exceed the turnover limit in Year 1, you will continue to be exempt if you remain with the tolerance level in Year 2, but in Year 3 your exemption will cease from 1st January of that year.
During these two years you will continue to retain micro-entrepreneur tax status, after which you will be required to use the régime réel.
If the turnover goes beyond the tolerance level you lose immediate exemption and you must include VAT on your invoices the following month. Your micro-entrepreneur tax status will cease at the end of the calendar year.
In addition, the turnover limits (€82,200 and €32,900) correspond to a full year, and operate pro-rata for business activity less than one year. So if you pass them in your first year, even on a pro-rate basis, you lose micro-entrepreneur status from the following 1st January.
There is no need to separately register your business in France for TVA, for you are given a TVA numberat the time you set up your business, when you receive your commercial registration number, the 'SIRET' (Système d’Identification du Répertoire des ENtreprises), on which your TVA number is based.
In terms of payment, in the first year payment is made in May for the previous year.
In the second and subsequent years, in July and December, you will be required to make provisional payments based on your previous declaration, although if, based on your previous declaration, the balance due is less than €1,000 none are necessary.
Credits higher than €150 are reimbursed (with delay!); in other cases they are imputed against future payments.
It is possible to go on-line using your Impôts business account to make the declaration. However, our strong advice would be to contact a good VAT accountant, as it is not for the faint-hearted.