There are a number of ‘VAT’ measures being introduced this year, some of which have already taken effect whilst others will only take effect later in 2015.
- ‘Imported’ second-hand cars
- Reverse charge VAT at importation
- Construction sector - extension of the reverse charge (in 2014) and modified filing obligations.
- Supplies of energy saving work on the conversion of offices to housing - subject to VAT at 10%.
- Supplies of ‘triple-play’- application of the normal rate to the total charge made.
- Reduced rate VAT on sporting events
- Reduced VAT rate on certain supplies in the ‘social housing’ sector.
- Supplies of works of art by the artist – subject to the 5,5% rate.
- Self-supply charge removed on certain self-supplies of goods and real-estate
- Simplification of the storage obligation (not invoices) regarding documents to be produced to justify an adequate VAT audit trail
I. ‘Imported’ secondhand road motor vehicles e.g. cars
From 1 July 2015, any person reselling a secondhand road motor vehicle brought into France via an intra-EU supply will be required to prove the VAT regime under which the vehicle was acquired in the other member state.
The measure is to prevent resellers in France using the secondhand VAT regime where the supplier of the vehicle himself did not correctly account for VAT in his country.
II. Reverse charge in certain circumstances to apply to imported goods
This is perhaps one of the more important changes and will allow many businesses, but not all, to no longer pay VAT at importation, on goods from third countries, and then claim it back. The change took effect on 1 January 2015.
The reverse charge will apply to any taxable person established in the EU who is liable to account for VAT at importation into France, can, by option, indicate the amount of VAT due directly onto their VAT returns (CA3 for example), provided that the importer holds an authorization for centralized Customs clearance.
For taxable persons established outside of the EU they may also opt for the reverse charge system, provided that the customs representative acting on the importer’s behalf has obtained the authorisation to use the Single Authorisation for Centralised Clearance.
The option to apply the reverse charge lasts for three years and is automatically extended by 3 year periods unless revoked with two months notice.
III. Construction sector – extension of the reverse charge (in 2014) and modified filing obligations
These two measures attempt to tackle a large number of essentially VAT frauds in the construction sector, there have been over the years a number of attempts, by firstly imposing an automatic reverse charge on sub-contractors supplying services to main contractors (this was introduced on 1 January 2014) and secondly by ensuring that all companies registering for VAT in the construction industry will have to file monthly VAT returns (on-line) and not annual returns, as was potentially the case beforehand.
Businesses can, if they so wish and to the extent that the conditions are respected, obtain approval to apply the simplified VAT filing régime from the second year of their activity.
This latter change took effect on 1 January 2015.
IV. Supplies of converted offices to housing - subject to VAT at 10% in the social sector
Supplies of converted offices to housing will be subject to VAT at the reduced 10% rate in the social sector.
V. Supplies of ‘triple-play’ – application of the normal VAT rate to the total charge made
Only where a separate charge is made for the supply of the right to receive a television broadcast will the 10% reduced rate apply, otherwise for ‘triple play’ the whole charge will be subject to VAT at 20%.
VI. VAT on sporting events
Following a challenge by the Commission, VAT will now be applied at the reduced rate of 5,5% to entrance charges to sporting competitions previously subject to the ‘taxe sur les spectacles’ and those entrance charges which were exempted from that tax by option of the relevant local authority. The change took effect for tax points falling on or after 1 January 2015.
VII. Reduced VAT rate on certain supplies in the ‘social housing’ sector
Certain supplies of reconstruction work, which create a new building, in the social housing sector are subject to VAT at the lower reduced rate of 5,5% from 1 January 2015.
In addition certain supplies of property to be used as a principal residence in the social sector and in certain defined geographic areas will also be subject to the 5,5% rate.
VIII. Supplies of works of art by the artist – subject to the 5,5% rate
From 1 January 2015 supplies of works of art by the artist will be subject to the lower reduced rate of 5,5%. Certain supplies of works of art will remain subject to VAT at the 20% rate.
IX. Self-supply charge removed on certain self-supplies of goods and real-estate
In order to align French with EU law, the requirement to account for a self-supply charge when a fixed asset constructed by the taxable person is brought into use for an activity which gives rise to a full right to deduct, was abolished with effect from 31 December 2014.
The obligation to apply a self-supply charge to fixed assets which are subsequently used for an activity outside of the scope of VAT has also been abolished – although there may well be an obligation to adjust the initial deduction made.
In addition the self-supply of a newly constructed building, within 2 years of its construction, is abolished if the constructor would, for that building either be obliged to apply VAT on the total price or has opted to tax the supply. Any use of the building before sale for an activity not giving a full right to deduct could give rise to an obligation to adjust the deduction of any input tax.
X. Simplification of the storage obligation (not invoices) regarding documents to be produced to justify an adequate VAT audit
The conditions under which documents must be stored to establish a reliable VAT audit trial are relaxed. Companies must still keep the documents for six years. However, they can store the documents in paper / electronic form, regardless of the original form of the documents.
The French Tax Authorities will detail at a later date the exact electronic storage obligations.