In France, sales tax is called TVA, which stands for Tax on Value Added. There is a standard rate of 19.6 % (applicable to most goods and services) and there are reduced rates of: 5.5 % (applicable to some goods and services) & 2.1 %.
The main benefit of reclaiming TVA is if the tax rate in France is higher than the other country (in which case you gain from paying a lower rate of tax) and the amount of tax involved is sufficient to justify the effort and paperwork of making a claim.
Special rates apply in:
- Corsica : 19.6 %, 13 %, 8 %, 5.5 %, 2.1 % and 0.9 %;
- The overseas departments, except French Guiana: 8.5 %, 2.1 %, 1.75 % and 1.05 %.
Germany and France, which boast more business travelers, than the Mediterranean countries, where VAT refunds are more meager anyway. Allow for an average of six months for refunds — two to four months in Britain, Germany and France. You can reclaim all VAT in France (20.6 percent) does not allow for hotels and restaurants
For claiming VAT based on the8th Directive, it is not obligatory to appoint a French fiscal representative.
E.U. businesses (8th Directive)
Eligibility for refund
Foreign taxable persons are entitled to recover French VAT, if the following conditions are met:
- the business is not registered, liable or eligible to be registered for VAT in France;
- the business has no residence, seat or permanent establishment in France; and
the business has not rendered taxable supplies in France except:
- certain tax exempted cross border transportations or ancillary services from/to non-E.U.countries;
- supplies for which the reverse charge mechanism applies; Please note that as from September 1st, 2006, the "reverse charge "mechanism is extended in France, thus limiting the VAT registration requirements for foreign companies ( not established for VAT purpose in France) trading with French VAT-registered customers. The new regulation is mandatory but its scope is specific.
- supplies performed under a VAT suspension regime, such as provided by Article 277 A of the French Tax Code; or
- electronically provided supplies whereby the foreign taxable person opted for the application of the special regime for non-established taxable persons supplying electronic services to non-taxable persons.
In any case, the VAT refund claim must be filed before June 30 of the calendar year following the one during which the VAT claimed back was assessable. Late claims are not accepted. An extension of this time limit is not possible.
When a business initially applies for a VAT refund in France it will receive a special registration number. The business must use this number every time it files an application for VAT refund. The registration number is strictly a VAT refund number. It is not a French VAT number.
The following documents must be submitted with each application:
- Original invoices, import documents, bills, vouchers, receipts or customs clearance forms (copies are not accepted);
- An original certificate of VAT status, since the claimant must prove that he is registered for VAT purposes in his country of establishment. The certificate may not be older than one year. Although, the validity of the statement is extended to three years, provided that the intercommunity identification number is entered in box 3 of the application form (form n° 3559) of the first VAT refund claim;
- If a VAT agent is appointed which is entitled to cash-in the refunded VAT, specific additional formalities have to be performed.
In respect of supplies of services, VAT becomes deductible at the time the price is paid, as long as the French supplier has not opted for the payment of VAT on the basis of the accruals. Therefore, for the first VAT refund claim, the French tax authorities usually demand the following documents:
- Copies of bank statements, showing the date and the amount actually paid by the claimant;
- In case where the payment is made by compensation, the claimant can justify such compensation by any mean of proof.
Refunds and appeals
The French tax authorities will stamp each invoice and/or import document to prevent their use for further application and will return them after a decision was taken. The decision concerning the application will, in principle, be announced within six months of the date when the application, accompanied by all necessary supporting documents required for examination of the application, is submitted to the French tax authorities. When the authorities request additional information, the six months period is suspended commencing on the date the request for information is sent to the claimant and ending on the date on which the claimant has met his obligation to provide the necessary information. Please note that all the supporting documentation must be provided at the latest at the time where the FTA takes its decision on the VAT refund claim. If the refund is granted, it will be made in Euro, at the applicant’s request, either on a French bank account or on a bank account of the State in which he is established. In the latter case, the bank charges for the transfer will be payable by the applicant. The VAT application does not bear any interest. If the refund is not granted, the grounds for refusal of the application will be stated. Appeals against such refusals may be made before the relevant Administrative Court within four months of receipt of the letter of refusal issued by the French tax authorities.