Brexit, VAT representation for non-EU countries: We answer 9 frequently asked questions about VAT representation in France.
VAT representation is not necessary for companies established in the EU but it is for those outside of it.
Unless Brexit provides an exemption from VAT laws, investors will need tax representation when they perform transactions that are subject to French VAT.
This article illustrates the importance of the matter in layman’s terms. Moreover, it examines the measures that can be taken in order to ensure a successful future following the referendum:
- Who needs to comply with these VAT formalities?
If you are a person or company established outside of the EU and you perform transactions subject to French VAT, you must accredit a taxable representative that is established in France.
- What type of company counts as not established in the EU?
A person is not established in the EU so long as there is no head office attributed to their economic activity and the person has no permanent establishment.
- What are the transactions subject to VAT?
The operations subject to VAT are taxable transactions (resale of goods acquired in France, supply of goods, supply of services related to property in France etc.) or exempt transactions (intra-community acquisition, intra-community supply).
- In what circumstances will Brexit force British companies to appoint a tax representative?
British companies will have to appoint a tax representative if:
- the UK is no longer part of the EU
- the UK does not arrange a legal instrument (with France) relating to mutual assistance similar in scope to that provided by Council Directive 2010/24/[EU] of March 16th 2010, concerning the mutual assistance for the recovery of claims related to taxes, duties and other charges, and by (EU) Council Regulation n° 904/2010 of October 7th 2010.
- Which companies are exempt from appointing a tax representative?
Non-established taxable persons in the EU are exempt from appointing a tax representative if they only perform transactions with suspended VAT which relate to goods that are placed or are intended to be placed under tax regime or warehousing.
- Who can be a tax representative?
The representative must be subject to French VAT (known tax services) and have good fiscal morality.
- What is ‘good fiscal morality’?
Fiscal morality is assessed by the tax administration on the day of the of the tax representative’s accreditation.
It is based on the regularity of revenue declarations and on the representative’s punctuality concerning these declarations.
- What is the tax representative obliged to do?
The representative must fulfil the legal and regulatory formalities and, in the case of taxable transactions, pay the tax due for all operations carried out in France.
Therefore, they must perform the following:
- Invoicing: the representative must issue invoices stating that they are acting as the representative or foreign taxpayer – establishing their position by indicating their name, address and VAT identification number
- Accounting: the representative must manage the accounting for transactions which are subject to French VAT unless the taxpayer (the person) prefers to handle the bookkeeping themselves. Supposing the bookkeeping is handled in this way, the representative must be able to present the accounting records and supporting documents relating to these transactions in the event of an audit (which would be carried out by the tax administration)
- Declaration of revenue returns and payment of the relevant VAT that is due
- Submission of declarations for the trade of goods (DEB in France) and (European) service declarations (DES)
- How do you appoint a tax representative?
Accreditation is granted by business tax services (SIE) following a written request by the tax representative along with the letter of appointment from the non-established taxable person.
To conclude, you will need a tax representative if you are situated outside of the EU. The tax representative’s position consists of performing the following tasks:
- Declaring revenue returns, and carrying out the DEB and the DES (if necessary)
- Providing the accounting for transactions carried out in France or being able to present the accounts, as well as supporting documents (invoices, delivery notes etc.), to the tax administration in the event of an audit
- Checking that issued invoices clearly state the name and address of the representative in order to prevent the tax administration from questioning the right to deduct VAT
If you think that this matter applies to you, it is important to ensure substantial understanding of all relevant information, facts and procedures. Here at Maupard, we would be more than happy to advise you on the next steps and to allow you to make the most of these opportunities.
Do not hesitate to contact us by telephone on +33 (0) 1 53 93 94 20 or by e-mail to [email protected], so we can work out the needs of your business. Our team of experts is here to answer any questions you may have.