How to suspend VAT payments on imports: Your guide to cross border trade and VAT payments
If you are a company performing operations relating to cross-border trade and you are subject to French VAT, you must settle this tax as soon as these operations cross the border, in accordance with Article 293 A of the CGI. As long as you meet the conditions for the legal right to reduce the amount of tax that you are required to pay, you can deduct this tax on declaration of the company’s turnover for the following month after this legal deduction has been confirmed.
Businesses which export, because of the nature of their economic activities, have VAT credit advantages.
In order for businesses to avoid making cash advances, it is possible to apply for suspensive customs or tax procedures which would allow the company to suspend VAT payments on imports.
The AI2 (Art.275 du CGI) tax procedure
Article 275 of the CGI authorises businesses who are subject to French VAT, when receiving or importing goods, to receive them VAT-free if they are intended to be used for the following reasons:
- To later be exported
- To be the object of an intercommunity delivery which would have been exempt from tax in any case according to article 262 of the CGI
- To be delivered to another member state of the European community and falls within the jurisdiction of the distance selling system or regarding goods supplied after assembly or installation by the seller
- The company gives service provision on those goods
In order to benefit from these measures, businesses must present a VAT-free purchase quota for the business tax services that they depend on.
This purchase quota is equal to the amount of deliveries that were made in the previous year, as mentioned in article 275 of the CGI. This represents the amount of purchases, intercommunity acquisitions and imports of goods that a company can complete (each year) without paying VAT.
N.B. These measures also apply to non-profit organisations who export goods as part of their humanitarian, charitable or educational activity.
The tax suspension system (Art. 277 A I 2° du CGI)
Law n°2010-237 of 9th March 2010, which has been in place since January 1st 2011, has replaced the old tax regimes (managed by the customs administration – ‘national export warehouse, national import warehouse, and the international regime of inward-processing’) with the tax suspension system (RSF).
This system allows you to not only suspend VAT payments but also similar taxes (for example; tax on mineral oil which is used for food, parafiscal tax in the textile and knitwear industries, parafiscal charges in the clothing industry…). It is exclusively a fiscal system; the RFS does not rule out national dispositions such as trade policy measures or suspension of excise duties.
It allows you to:
- Stock and/or carry out processing operations (processing, repairs…) whilst suspending VAT payments on goods imported into or bought into France or from another EU member state which is to be re-exported or sold to another EU member state
- Suspend the VAT payment whilst stocking goods that are imported from countries with previous political links to France but that are not part of mainland France (Overseas French ‘départments and territories’ and the Channel Islands) or goods imported from developing countries which are not intended to be sold immediately in the common market
To benefit from this system, authorisation must be granted by the executive customs management team (DGDDI) or by the public finance management team (DGFIP).
There is a VAT tax credit when the VAT deductible on purchases exceeds the VAT to be repaid on sales.
A company can decide to benefit from this credit on their turnover declaration for the following year or to ask for the reimbursement from the business tax service (SIE) that it depends on.
If you think you could benefit from these tax credits, 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 this matter 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.