Legal background: Distant sales carried out by a businesses established in other EU member states to French private individuals are subject to French VAT when the amount of annual sales exceeds 100.000 € (Art. 258 B of the Franch Tax Code). In that case the vendor has to account for French VAT.

Schemes in place: Businesses based outside France, in countries where VAT rates are lower than French VAT rates can voluntarily ignore the fact that they exceed the said threshold while others operate in France using companies established abroad but without real economic substance.

Outcome of audit: In order to fight against these situations, characterized as fraud according to them, Tax Authorities announced they are able to track them, notably using watch tools on Internet. Accordingly they ask foreign businesses to regularize their situation in order to avoid important penalties ( e.g. a penalty of 80 % for hidden activities).