French VAT on international transactions: Everything you need to know!

 

Do you have any business transactions with suppliers or customers located in other European Union (EU) country or outside the EU and and you don’t understand how it all works with regards VAT in France?

Below you will find practical information on VAT in Europe and outside EU.

For international transactions, the first distinction to be made is whether the transaction is a supply of goods or a service.

I- The supply of goods

1. Outside Europe: Exports and imports

The supply of goods between a French company and a company located outside the European Union constitutes imports (for French, for purchase) or exports (for French, for sale).

Exports are exempt from VAT and imports are subject to French VAT.
The latter is to be paid at customs.

It is common for the importer to use a transit agent to handle customs clearance.

 

CASE N°1: A FRENCH ENTREPRENEUR/COMPANY SELLS GOODS TO AN AMERICAN CUSTOMER

Invoice sent by a French supplier to an American customer (USA) for €10,000 excluding VAT.

Invoice
sent to the American customer
VAT Exportation,
VAT exemption
Invoice Mention: Exonération de TVA – Article 262 1° du CGI

 

CASE N°2: A FRENCH ENTREPRENEUR/COMPANY BUYS GOODS FROM A CHINESE SUPPLIER

Receipt of an invoice from the Chinese supplier for €100,000 (invoice without VAT, statements in accordance with Chinese legislation).

Invoice from the Chinese supplier Invoice from the French shipping agent
VAT Importation
Invoice received without VAT
The shipper invoices VAT on the service provided
and re-invoices the VAT on the importation that it has paid on behalf of its customer.
INVOICE In compliance with Chinese legislation If French transit agent: common usual information (VAT number of the transit agent)

2. Inside Europe: Intra-Community acquisitions and sales

The supply of goods between a French company and a company located in another EU country is an intra-Community acquisition (for French) or an intra-Community sale (for French).
Intra-Community supplies are invoiced without VAT.
Purchasers self-assess VAT “auto-liquidation de TVA” (application of deductible and collected VAT) at the rate applicable in their country.

 

CASE N°3: A FRENCH COMPANY SELLS 1,000 € OF GOODS TO AN ITALIAN CUSTOMER

French supplier Italian customer
VAT Intra-Community supply
Invoice without VAT, VAT paid by the customer
intra-community acquisition
The Italian customer self-assesses VAT at the Italian rate
INVOICE Intracommunity VAT number of the French supplier and the Italian customer

Mention: “Autoliquidation par le preneur, article 262 ter I 1° du CGI ou selon l’article 138 de la directive 2006/112/CE).”

The Italian customer checks the invoice (mention of the 2 VAT numbers + Mention “autoliquidation”)

 

CASE N°4: A FRENCH COMPANY BUYS RAW MATERIALS FROM A POLISH SUPPLIER FOR €1,000 BEFORE TAX

French customer Polish supplier
VAT Intra-Community acquisition intra-community supply
Invoice without VAT, VAT paid by the customer
INVOICE Verification of the French and Polish VAT numbers on the invocie
Verification of the mention equivalent to “Auto-liquidation” but written in Polish.
Indication of the 2 intra-Community VAT numbers + indication equivalent to “Reverse charge by the customer”

II- International services provided

 

For the supply of international services, the rules are identical depending on whether the contracting parties are both members of the European Union or only one of them is a member of the European Union.
For B to B relationships (Business to Business, business-to-business relationships), the place of taxation of the supply of services is the place where the customer is established.

The service provider sends an invoice excluding VAT. The customer (if located in the European Union) autoliquids VAT at the rate applicable in his country.

 

CASE N°5: SALE OF A SERVICE

 

1.  A French company invoices a management consulting service to Spanish or Swiss company :

French service provider Spanish or Swiss customer
VAT If Spanish customer: sale of intra-Community service provision (invoice without VAT)
If Swiss customer: sale of non-EU services (VAT exemption)
Spanish customer: purchase of intra-Community services
Swiss customer: purchase of non-EU services
INVOICE If Spanish customer:
indication of the French and Spanish intra-Community VAT numberMention : « Auto-liquidation par le preneur » (Art. 283-2 du CGI ou Art. 44 de la directive 2008/8)If Swiss customer: indication of the French intra-community VAT numberMention : « Exonération TVA art. 283-2 du CGI ou art. 44 de la directive 2008/8»
Verification of the information on the invoice and intra-Community VAT numbers

 

Advice: in the case of a customer with whom the French company is working for the first time (example: Spanish customer), the French supplier is advised to check the validity of the intra-Community VAT number provided by the customer on the VIES system.

 

CASE N°6: PURCHASE OF A SERVICE

 

2. A French company buys a management consulting service from an Italian or American company :

French customer Italian or American provider
VAT If Italian service provider: purchase of intra-Community service provision
If American service provider: purchase of non-EU services
Italian supplier: sale of intra-Community services
American service provider: sale of international services
INVOICE If Italian service provider: verification of the presence of French and Italian VAT numbers
Verification of the mention equivalent to “Autoliquidation” but written in Italian.
If American service provider: verification of at least the precise name of the recipient (French: name and address)
Italian service provider: the 2 numbers
Mention “autoliquidation” (or Italian equivalent)American service provider: according to American law

 

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