In 2015 the French Government introduced the possibility for companies to self-assess VAT on imports, in order to attract and facilitate imports into France.

The French Parliament recently issued a private bill dedicated to the improvement of the competitiveness of French ports (“law on the blue economy”). In this law, the French Parliament has proposed to modify the optional self-assessment regime for VAT on imports in order to expand the field of eligible operators. 

Although this extension was expected and will be well received by the operators, a few questions remain outstanding while awaiting the final adoption of this law. 

  1. Current self-assessment regime for VAT on imports and adoption of an extensive but still optional regime in 2016 

Article 291 of the French tax code stipulates that imports of movable property are in principle subject to VAT. Article 1695 of the French tax code provides that the VAT on imports must be paid to the customs authorities.  In principle, the payment takes place at the time of customs clearance. In this ‘in principle’ regime, the VAT paid to customs is deducted on the operator’s French VAT return (generally monthly) from the VAT collected by the latter. If the operator, as the tax payer, is in a credit position, it receives a reimbursement. 

The VAT Directive 2006/112/EC (revision of the sixth directive) stipulates that EU Member States may authorise companies to self-assess VAT on their imports. 

The amended finance act for 2014 modified article 1695 of the French tax code so that companies with “PDU[1] certification (single authorisation customs clearance procedure) could opt for self-assessment of VAT on imports (art.1695-II of the French tax code). This option is valid for 3 years and is tacitly renewable. This regime was introduced in France in order to facilitate imports by removing the cash flow impact caused by the timing difference between payment of VAT to customs (or in practice to the customs broker) and the deduction of this VAT on the VAT returns or the reimbursement of the VAT credits thus generated. 

The PDU single authorisation procedure means that all customs clearance operations are carried out with one single customs office. The condition for obtaining this PDU accreditation has been set by the legislator in order to reduce the risk of VAT fraud. However, the resulting limitation of the field of application for self-assessment has been open to criticism. Setting in place the PDU single authorisation procedure is effectively time consuming (three months of customs audit in particular). Therefore, in practice, this option is limited to less than 500 PDUapproved companies. 

Article 1695-II of the French tax code will be modified by the law on the blue economy in order to remove the PDU certification requirement for European operators. The new regime is still optional. 

  1. Legal and practical scope of the reform set in place by the “law on the blue economy”

Apparently the self-assessment regime has not been mo

dified for companies that are not established in the European Union. These companies may still opt for self-assessment of VAT on imports, but only if they themselves or their customs brokers have PDUcertification. 

To date, Parliament has not yet modified this obligation for foreign companies, despite the fact that this procedure should be scrapped when the new Community customs code (CC) comes into force.  ThePDU single authorisation procedure is to be replaced by a national, centralised customs clearance procedure. We can hope that the regime for foreign companies not established in the European Union will be brought into line with the modified regime applicable to European companies.  

Moreover, the operators will also be able to turn to alternative regimes, because other facilitation procedures should continue to exist in France, which are applicable to both European and non-European companies.

We understand that certain operators are worried about losing the facilitation procedures that they use already. However, these are based on different texts (French tax code for the application of the above mentioned VAT directive or CC) of article 1695 of the French tax code. These provisions will not be altered by the reform in question. These facilitation procedures include the following: 

  • The tax exempt purchase and importation regime, provided by article 275 of the French tax code, also known as "regime AI2" or "usual exporters regime". This regime will be maintained. It makes it possible to import and to make intracommunity acquisitions and purchases exempt from VAT, on the basis of turnover realised via exports or intracommunity deliveries exempt from VAT,  
  • The VAT suspension regimes and Bonded Warehouse regimes will remain applicable,  
  • The "regime 42" (VAT exemption on imports of goods destined for an intracommunity delivery that is exempt in another EU Member State art. 291 III-4°of the French tax code) will remain in place,  
  • Clearly the possibility set in place in 2005, of a guarantee waiver in exchange for a deferred and single payment of VAT on imports (deferral of payment until the 25th of the following month for all import declarations for a given month) should still be available.

Lastly, it is important to underline the fact that the verifications concerning VAT on imports should be carried out by the customs authorities (in particular the tax base) but the self-assessment process would be verified by the tax authorities. Although each of these authorities has already commented separately on the conditions of the verifications that they may carry out in this respect (customs circular dated 7/01/2015 and BOFIP TVA-DECLA-20-20-10-20-20150304), the tax security of the operators could be comforted if these two authorities were to issue joint comments on these new provisions rapidly.