Reverse Charge on VAT for Imports: Important changes you should be aware of.
On 8 November 2016, Parliament adopted the “Sapin 2” law, which provides a framework for the VAT reverse charge on imports. Article 58 of the law replaces the simplified scheme with an authorisation system due to fears of a strong increase in VAT fraud…
In principle, the VAT due on imported goods is paid by the customs authorities at customs clearance. It is then recoverable from the revenue statements filed with the tax authorities.
The law of December 29, 2014 to amend finances in 2014 introduced the possibility for importing companies to reverse charge when they are liable for VAT in France.
This is useful because it allows companies to not pay VAT when clearing customs. Beneficiary businesses are allowed to declare and deduct the VAT on the n°3310 CA3 form.
Mandatory Administrative Authorisation
As the “Sapin 2” law enters into effect, businesses wishing to benefit from the system of reverse charge on imports must send a request for authorisation to the customs administration. They will no longer be able to benefit from options allowing automatic application of the reverse charge system.
Companies based in the European Union must satisfy the following four conditions:
- Have completed at least 4 imports within the European Union over the course of the 12 months preceding the application.
- Possess a system of management for the customs and fiscal records allowing the follow-up of the import operations. This condition is considered fulfilled when the applicant confirms the management system on the application form.
- Justify the absence of serious or repeated infringements of customs and tax provisions.
- Provide proof of financial solvency to enable them to fulfil their commitments during the 12 months preceding the application. The customs administration examines this condition directly in light of the available information. This condition is met if the applicant has not been the subject of a default in payment from the tax and customs authorities and is not the subject of collective solvency proceedings. If the applicant has been established for less than 12 months, his/her solvency will be evaluated on the basis of the information available when the application was submitted.
These conditions will be considered met when they have the status of Authorised Economic Operator.
Businesses established outside the European Union must clear through a customs representative with “Customs simplification” status.
In conclusion, the authorisation of reverse charge will be more restrictive for businesses established within the EU than for those outside. Indeed, the majority of customs representatives have the status of Authorized Economic Operator.
Transitionary measures predicted for current options
Schemes implemented from January 1, 2015, before the adoption of the “Sapin 2” law, are permitted. However, they cannot be subject to the 3 year tacit renewal as outlined in article 1695 of the French General Tax Code (CGI) in the former version of the law.
In fact, companies currently applying the mechanism of reverse charge must obtain authorisation from the customs administration in order to renew it. This allows operators time to meet the conditions outlined in the new version or Article 1695.
Note that the “Sapin 2” law does not affect the duration of the application to the reverse charge scheme. Authorisation applies to operations taking place from the first day of the month following the decision and until December 31 of the 3rd year after.
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.