French Tax Authority offer amnesty to foreign sellers for historic VAT on distance sales

The French Tax Authority has issued a circular to non-resident businesses who registered for VAT with effect July 1, 2021 as a result of e-commerce changes and the removal of the VAT distance selling thresholds for goods in the EU. It states that multiple foreign businesses should have been registered for French VAT before this date, on the basis that they breached the historic French VAT registration distance selling threshold of EUR 35,000 in a calendar year. 

To incentivise foreign businesses, the French Tax Authority has announced a 4-month amnesty period until September 30, 2022 to allow companies to voluntarily disclose and regularise the previous earlier periods for which they should have been registered for VAT and accounted for French VAT on sales of goods to French consumers.

To qualify for this amnesty, companies must, before September 30, 2022, submit to the Service des impôts des entreprises étrangères (“SIEE” – France’s Foreign Corporate Tax Service office) in Noisy-le-Grand, a full “regularisation file” in hard copy or by email. This must include:

• Reason for the regularisation
• All corrective VAT returns filed (CA3) with details by year of the distance sales to France not previously declared
• All documents / evidence to support transactions added to the corrective VAT returns
• In case of a high volume of transactions, a table setting out all transactions listed per year with the amount of VAT due in France 
• Companies will also have to prove that they did not submit a VAT claim in their home country for the relevant transactions for a longer period than regularised in France 

Please note that the French Tax Authority will always notify the seller’s home country tax authority about the regularisation period in France and request to be informed of any VAT claim submitted by the seller for the same period. The company is required to pay the full amount of French VAT due following the submission of the disclosure once accepted and confirmed by the French Tax Authority. In addition, while there should be no penalties levied, businesses will still need to pay late payment interest on the total liability.

Under this special amnesty period, the look-back period required to be corrected is ordinarily capped at three years. However, should the seller’s home country allow businesses to reclaim local VAT paid but not due beyond three years, that this will also be applicable in France and the regularisation period will be extended in France.

In the event of a foreign business not taking advantage of this special amnesty period, in the case of a tax audit by the French Tax Authority, a specific tax rule (occult activity rule) can be used to extend the audit period to up to 10 years. In addition, an 80% penalty will also apply, together with late payment interest and an additional potential penalty relating to the non-submission of Intrastat (DEB).

Speak to one of our experts about becoming VAT registered in France or to discuss wider French VAT compliance including the upcoming e-invoicing and e-reporting requirements.