From 1 January 2018, as part of the fight against VAT fraud, retail businesses in France will be required to record customer payments using certified secure accounting software or cash register systems.
What are the requirements?
Article 286, I - 3°) bis of the French Tax Code introduces an obligation from 1 January 2018 on VAT taxpayers who record transactions with non-taxable customers through an accounting or management software or a cash register system, to use software or a system which provides for the (i) inalterability, (ii) security and (iii) storage and archiving of data. Businesses required to comply with this obligation will have to obtain a certificate from an accredited third party or the software or cash register system provider which certifies that their software or cash register systems meet these requirements.
This obligation also applies to branches or affiliate companies of foreign entities subject to VAT in France.
According to a press release issued by the Ministry of Public Action and Accounts, the requirement will be simplified so that it will apply only to cash register systems and cash register software. The draft 2018 Budget Bill is still under discussion and we are monitoring developments.
What retail businesses in France need to do
Companies with a retail presence in France should talk to their accounting and cash register software providers about obtaining a certificate which confirms that their accounting software or cash management systems comply with the new requirements about inalterability, security, and storage and archiving of customer payment data.
This is because VAT taxpayers may be required to provide a certificate to the tax authorities evidencing that their accounting software or cash management system fulfills the new requirements.
Sanctions for non-compliance
If the user is unable to provide the required certificate on the request or audit by the tax authorities, the user may be subject to a fine of € 7,500 for each applicable software or cash register system.
Even if a certificate is provided to the tax authorities, if the tax authorities can demonstrate a fraudulent use of the software or system in the context of a subsequent tax audit, the user and the software provider may each face tax consequences. The software provider may be liable for a fine of 15% of its turnover (excluding taxes) related to the relevant software or system and may be jointly liable with the user of the software or system for the payment of the relevant reassessed tax duties and penalties.
Also, each of the user, the software provider and the accredited body may be subject to criminal sanctions for having used or developed a fraudulent software or system, as well as for having issued a false certificate, as the case may be.
The software may be certified by either (i) a body accredited by the French Accreditation Committee (Comité français d’accréditation or COFRAC) or (ii) the software provider (éditeur) of the accounting or management software or cash register system.
(i) Certificate from COFRAC
Currently, there are two bodies accredited by COFRAC:
- LNE - National Testing Laboratory (Laboratoire national de métrologie et d'essais or LNE)
- AFNOR - the French national organization for standardization (Association Française de Normalisation or AFNOR)
(ii) Certificate issued by the software provider of the accounting or management software or cash register system
The software provider means the person who (i) owns the source code of the software or system and (ii) has control over the parameters of the product.
When the software or system is created in such way that it may be modified by anyone as its design is publicly accessible (i.e. open-source), the software provider who can validly request or produce a certificate is either (i) the original creator of the system/software where none of the parameters affecting the respect of the conditions may be modified by a third person, or (ii) the last person who modified the software or system.
The certificate must be prepared according to a template issued by the tax authorities and must:
- be individually issued to the user;
- indicate that the accounting / management software / cash register system satisfies the conditions of inalterability, security, storage and archiving of data as provided in Article 286, I - 3°) bis of the French Tax Code; and
- indicate the name and the references of the relevant software (including the version of the software and if applicable, its license number) or the relevant system and the date on which the software or the system was purchased by the user.
In both cases (option (i) or (ii) above), the software provider is responsible for requesting the certification from an accredited body or issuing the individual certificate itself. The original or copy of the certificate must be delivered to the user of the software or the system, so that the user can prove compliance to the tax authorities for each version of each software and system used.