On 31 December 2016, the reverse-charge system of VAT for imports was extended to a wider group of companies.

The principle of reverse-charging VAT

When a French company imports a good coming from a country outside the European Union (EU), that generates payment of French VAT, which the customs department is responsible for collecting (as it does any other applicable import duties and fees). This is the classic import procedure.

However, there is also a simplified procedure referred to as “reverse charging.” Companies are then able to self-assess the customs-related VAT on their VAT declaration and therefore not make a cash outlay. This mechanism, originally available only to importers eligible for the PDU (single domiciliation procedure), was extended on 31 December 2016.

The companies eligible for the reverse-charging system

To be able to reverse charge VAT for imports, the companies must fulfil all of the following conditions:

– possess a French VAT number;
– be subject to VAT under the regular payment-based system;
– have carried out at least four (4) imports into the EU over the last twelve months;
– possess a system for managing customs and tax recordings so that import transactions can be reviewed;
– provide evidence that it has not committed any serious or repeated tax or customs violations;
– be financially sound so that they can pay their current commitments.

The application for authorisation

A company that want to operate under the scheme and that fulfils the conditions listed above is required to apply for authorisation by filling out a special form in the principal customs offices in the jurisdiction in which it files its import declarations.

The administration has two months in which to make a ruling on this application. If it is accepted, the authorisation is valid as of the first day of the month following acceptance and up to 31 December of the third year thereafter. Note that the authorisation is subject to tacit renewal for the same period
(e.g., the authorisation is accepted on 25 July 2017; the authorisation will then be valid from 1 August 2017 until 31 December 2020.)

Filing requirements

The eligible company will fill out its VAT declaration (form CA3), taking account of the scheme, providing:
– in Section A, box 2B: the assessment basis, inclusive of customs duties;
– in Section B, box 7C: the specific amount of VAT calculated on the imports and collected as per boxes 8 and 11 of Section B,
– in Section B, boxes 19 and/or 20: the amount of deductible VAT on the reverse-charged imports (including the deductible VAT on the transactions of the month or the quarter).

These filing requirements are mandatory; failure to follow the self-assessment procedures is subject to a fine of 5% of the total deductible VAT.

We are entirely available if you have any further queries about the issues discussed in this newsletter or about any other accounting, tax, social security or law related topic.