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VAT (value added tax) is a tax imposed on individuals when purchasing goods or services. Companies are not liable for this tax, but they are responsible for collecting VAT on behalf of the State and then remitting it. At the same time, the VAT paid by companies during their professional purchases is reimbursed by the State: this is deductible VAT. Definition, calculation and declaration… focus on VAT.
Capital video: VAT
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– What is VAT?
What is VAT (value added tax)?
VAT: definition
VAT is a French indirect tax imposed on individuals when purchasing a good or service. It is an indirect tax in the sense that the tax is levied indirectly on individuals, via companies that sell the goods purchased or perform the services paid for.
Professionals must declare the VAT collected for tax purposes
It is up to professionals to collect VAT on these taxable transactions and to declare it. The professions concerned are:
- commercial,
- industrial,
- artisanal,
- liberal.
How does VAT work?
When a company sells a good or service, the price charged to the customer takes into account the amount of VAT. This means that the company collects a price including VAT (all taxes included), but only keeps for itself the price excluding VAT (excluding tax).
The difference between the two amounts corresponds to VAT. The end consumer, the individual customer, therefore pays the price including VAT and the company keeps the price excluding VAT and pays the VAT amount to the State.
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What is purchasing power?
What operations are subject to VAT?
Several types of transactions are taxable.
By nature
Operations by nature include deliveries of movable goods, provision of services or intra-community acquisitions (those which involve the payment of consideration by a purchaser, which relate to an economic activity and which are carried out by an independent person).
By a legal provision
We find all the operations imposed on VAT by law. To know :
- the imports,
- personal deliveries of goods and services,
- deliveries of buildings constructed less than five years ago.
By option
Certain professionals exempt from VAT can voluntarily submit to it. For example :
- renters of bare premises for industrial or commercial use,
- companies that want to waive the VAT-based exemption,
- territorial or local authorities,
- agricultural operators.
Corporate tax: rates, declaration and IS procedures
What operations are exempt from VAT?
Certain operations are exempt from VAT, namely activities:
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- maritime fishing,
- paramedical and medical,
- teaching,
- exports and intra-community deliveries,
- rental of bare buildings or furnished accommodation,
- deliveries of new industrial waste and recovered materials.
Intra-community VAT and self-employed: what rules?
How to calculate VAT?
A rate that varies depending on the nature of the goods and services
To calculate the applicable VAT, it is necessary to know the VAT rate which is legally set by the State and which varies depending on the nature of the good or service sold. There are different VAT rates in France, the amount of which varies depending on the nature of the good or service sold.
Normal VAT rate equal to 20%
It concerns the majority of goods or services. This is the rate that applies when no other rate is provided for by law.
Intermediate VAT rate equal to 10%
It concerns :
- non-reimbursable medications,
- the provision of hotel accommodation,
- sales for consumption on site,
- work relating to residential premises which does not benefit from the rate of 5.5%,
- unprocessed agricultural products,
- firewood,
- fairs and exhibitions,
- games and fairground rides,
- entrance fees to museums, zoos, monuments,
- passenger transport,
- waste treatment,
- Restoration.
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VAT rate reduced to 5.5%
It concerns basic necessities such as:
- the water,
- electricity or gas,
- food products,
- books,
- the provision of meals in school canteens,
- live show and cinema tickets,
- equipment and services for the disabled,
- accession to property.
VAT rate at 2.1%
It applies to certain press publications, reimbursable medicines and even certain shows.
>> Our complete tax guide. How to declare your income? How to reduce your tax bill through investments? What to do in the event of an administrative audit?
What VAT must the consumer pay?
To find out the amount of VAT paid by a customer, the VAT rate should be applied to the price excluding tax of the good or service sold:
- Price of the product excluding taxes (HT) = 100 euros
- Amount of VAT = 100 x 20% = 20 euros of VAT collected that the company pays to the State
- Product price including tax = 100 + 20 = 120 euros including tax
What is deductible VAT?
A deduction on professional purchases
When a company pays VAT on these professional purchases, it is called deductible VAT.
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The amount of deductible VAT that businesses pay on their business purchases is attributable to the amount of VAT they collected from their customers on the sales they made.
Conditions to benefit from it
To be able to deduct VAT, the company must meet certain conditions:
- the deductible VAT must be justified by the exercise of the professional activity of the company;
- the company must be in possession of the corresponding invoice stating the amount of VAT paid.
If the amount of deductible VAT is greater than the VAT collected, the company benefits from a VAT credit. Several choices are then available to the professional:
- apply the VAT credit on your next VAT returns;
- obtain reimbursement of the credit from the tax authorities.
Self-employed taxes: regime, rates and declaration
VAT declaration and payment: what steps to take in 2024?
Annual declaration
Companies that declare less than 15,000 euros of VAT per year benefit from the simplified real regime. The VAT declaration is an annual declaration which must be submitted no later than the 2nd working day following May 1, 2024 via form 3517-S-SD.
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This declaration must mention all transactions subject to VAT for the previous year.
If the company’s financial year does not correspond to the calendar year, the declaration must be sent within three months following the end of the financial year.
Online payment on the tax website
VAT payment is made online on the tax website by two half-yearly installments calculated according to the VAT due for the previous year according to the following methods:
- 55% in July.
- 40% in December.
Companies which declare more than 15,000 euros of VAT per year are subject to the normal real regime.
Each month, the company declares the VAT for the previous month online and also pays it from its professional account on the tax website.
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