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14 December 2021

France implements automatic reverse charge for import VAT as of 1 January 2022

The French law currently provides that an importing company established or not in the European Union (EU) customs territory and moreover liable for import Value Added Tax (VAT) may, with the authorization of the customs authorities (provided that the said company is already registered for VAT purposes in France at that time), pay the tax due on import and deduct it simultaneously on its VAT return.

This is the so-called reverse charge mechanism for VAT due on import which: (i) is subject to prior authorization from French customs; and (ii) allows the importing companies to pay and deduct the VAT due on import to the French tax authorities via their VAT return (instead of paying it first to customs authorities when the goods are cleared in France, and then recovering it later).

However, as of 1 January 2022, this mechanism of simultaneous payment and deduction of VAT due on import will become automatic and managed by the French tax authorities as part of the unification of the management and collection of taxes by the latter. In other words, no prior authorization will be required, and any importing company will now have to simultaneously pay and deduct the VAT due on import on their French VAT returns automatically, except in the case of free purchase quota for the imports.

Accordingly, there will be two alternatives as of 1 January 2022:

The importing company is already registered for VAT purposes in France:

Its French VAT ID number must be shown on the import declaration and the importing company will have to simultaneously pay and deduct the import VAT in its VAT returns.

The mapping of flows for VAT compliance purposes will have to be updated as the fields of the French VAT return will be fully amended as of 1 January 2022.

The importing company is not yet registered for VAT purposes in France:

A VAT registration will be required prior to any import into France, the French VAT ID number allocated will have to be shown on the import declaration and the importing company will have to simultaneously pay and deduct the import VAT in its VAT returns.

It is important to note that a pre-filling of the French VAT returns based on the import amounts reported in the customs declarations will be performed by the French tax authorities. In addition, a web service is provided for by the customs authorities in order to enable the importing companies to check the pre-filled amounts (an online account on the customs authorities’ website will be required for this purpose).

Also, operators that have already implemented the OSS (One-stop Shop) regime will have also to submit a French VAT return for import VAT purposes.

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For additional information with respect to this Alert, please contact the following:

Ernst & Young Société d'Avocats, Indirect Tax, Paris

Document ID: 2021-6372

 
 

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