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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Hi there, great article. I am a small business owner based in Washington, USA. I am preparing an invoice for a client based in Paris, France. I believe that CASE N°6: PURCHASE OF A SERVICE applies to me? Does this mean that I don’t have to mention anything about VAT?
Thank you Gerogia. If your client is a professional in France, you don’t invoice them the US VAT.
As we are not expert in US taxation, we encourage you to check with your CAP or US tax expert.
We wish you all the best!
ESCEC Team
Great summary! May I ask – I am a new auto-entrepreneur in France, and providing consulting services to a company registered in Hong Kong. So in this case, I do not have to add french TVA is that correct? And I still need to get a VAT number once I pass the limit, but indicate « Exonération TVA art. 283-2 du CGI ou art. 44 de la directive 2008/8» in the invoice to the client?
Thank you very much!
Hello, I was wondering if VAT applies for a sale of Goods from Mainland France to Martinique, Guadeloupe and Reunion? Should is be considered as an Export or should we apply 8,5% VAT ? Thanks for your help,
If I am a UK based company and use a French company for Consulting Services should they be charging and should I be paying them VAT? It was not originally invoiced and now they are trying to retrospectively charge for VAT from June 2019 to Dec 2020.
Hi, Thank you very much for this article, it is very helpful. I have a French company, can I invoice an Australian customer in AUD and record the amount in Euro’s for my own records?
Kind Regards,Stephanie
Thank you, we appreciate !
You can also check our Youtube channel:
https://www.youtube.com/channel/UCBYwnj41ydoIkU3Qe–IaRw
Team ESCEC