France: The Goods and Services Tax Code – (A way to clarify the applicable rules!)

Since 2020, the French government’s ambition has been to ‘marry’ the management and collection of different, notably customs, taxes in the hands of a single directorate, to provide companies with a single tax interlocutor.

Over the past few years, responsibility for taxes has been in the process of being transferred from French customs to the French tax authorities: in 2019, for non-alcoholic beverages; and in 2020 and 2021 for general taxes regarding polluting activities. In 2022, it is the turn of French import VAT, consumption taxes on electricity, gas and carbon, and the annual registration fee. 2023 is likely to see the transfer of customs penalties and, in 2024, the domestic taxes on energy products and the collection of the indirect contribution on alcohol and tobacco.

Act Two of this streamlining has involved the implementation of the Goods and Services Tax Code, and the general application of the reverse charge of import VAT, which went into effect on 1 January 2022.

1. Presentation of the Goods and Services Tax Code

The French government has been empowered by the French parliament to recodify taxation directly or indirectly affecting certain products, services or transactions, with the aim in particular of harmonising the methods of payment, collection, refunding and auditing.

In this context, the new Goods and Services Tax Code, which came into force on 1 January 2022, recodifies tax elements (until now contained in the General Tax Code and the Customs Code) and also transposes various standards of domestic law and European Union law, which were previously fragmented within several sources.

The Goods and Services Tax Code currently includes general provisions; the general system of excise duties on energy; alcohol and tobacco; taxes on transport as well as on industrial and craft products.

Despite consolidating such taxes, to date, the Goods and Services Tax Code does not establish a uniform and common regime for tax procedures and penalties that are set in Tax Procedures legislation, the Customs Code, and the General Tax Code.

2. General application of the reverse charge of import VAT

Prior to 2022, companies that imported taxable goods from third countries ordinarily had to pay VAT to the customs authorities. They could nevertheless usually recover this import VAT when filing their VAT return. Companies could opt for the reverse charge mechanism on import VAT to avoid the cash advance but a number of special conditions applied.

The reverse charge of import VAT is now mandatory and is no longer an optional procedure – it applies to all importers into France, who must be registered for VAT in France.

Part of the information is pre-filled or completed in the VAT return from the customs system. This pre-filling will be implemented over time depending on the type of information.

We will be following such measures closely and will provide additional information especially if practical aspects are encountered by businesses.

Read the WTS Global Customs Newsletter here.