France : REVERSE-CHARGE MECHANISM ON IMPORT VAT
From January 1st, 2022, the import VAT rule has changed. The reverse charge mechanism is applied What Is Import VAT reverse charge mechanism? And how It affects eSellers? ATG Tax Global’s VAT&Customs manager Richard Mbome will answer you all these questions in this article.
- Background
Definition
Import VAT is a tax paid on goods bought in one country and imported into another. In the case of European Union (EU), import VAT is the tax paid on goods bought from any country outside the EU and imported into the territory of the Union.
Reminder of the former system (before 2022)
- Before January 2022, the reverse charge of VAT on import was implemented after an authorisation from the French Customs (DGDDI) if the seller Is established within the EU; for Non-EU sellers, they could benefit from the reverse charge of import VAT if their Customs Representative holds an Authorised Economic Operator (AEO) authorization
- These are the condition needed for applying before 2022:
o have carried out at least four imports into the EU in the 12 months preceding the request (these can be into any EU Member state);
o have a system (of internal control) in place to manage customs and tax filings and documents which allow the taxpayer to fully track its importations
o not have committed any serious or repeated breaches of customs or tax rules in the last 12 months;
o have been financially solvent in the 12 months preceding the request to apply the reverse-charge system.
- What are the new changes?
From January 1st, 2022, the management and collection of VAT on imports will be transferred from the French Customs (DGDDI) to the Tax Authorities (DGFiP).
This transfer of competence will simplify the collection of import VAT since it will be declared, paid and deducted by the same administration, which is a significant relief for businesses.
Therefore, this transfer of competence will lead to the generalisation of the reverse charge of VAT on imports. As the importer collects and deducts the import VAT on the periodic VAT reports (CA3), the reverse charge of import VAT would become compulsory in France, without any eligibility conditions as It was the case before.
3- How does It impact the VAT returns ?
- Importers will receive each month their CA3 pre-filled with the amount of reverse charge VAT (on their imported goods of the previous month).
- Our current CA3 will thus evolve to include transactions relating to imports. The pre-filling will be effective on the 14th of each month.
- However, the pre-filled amounts must be double-checked and If necessary, amended (will be develop on the following slides)
4- How to take now import VAT invoices into account ?
Tax point
- The transactions affected are those for which the Import VAT becomes due on or after January 1, 2022
- This liability corresponds to the moment when the goods are released for free circulation on the market or temporarily admitted for partial exemption from import duties, i.e., in practice, when the removal order (“Bon à enlever” - BAE) is obtained
- For a VAT return relating to a tax month M, the pre-filling of line A4 takes into account only the import VAT assessment bases on the customs declarations relating to these transactions, which have been given a removal order (Bon à enlever) date in that month M.
- Consequence: Customs declarations validated in a month M but which have not obtained the BAE in that reference month, are not taken into account for the purposes of pre-filling the VAT return for that month M. Their import VAT data should not be reported by businesses on that VAT return for that tax period M.
5- Regularisations and penalties
Regarding the penalties, there is a tolerance period if the regularization is processed within the two months following the VAT liability.
If you have any question regarding French Import VAT, please contact us: enquiries@atgtaxglobal.fr
Come to talk to us on booth WL480 in WHITE LABEL WORLD EXPO UK 2022.