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VAT deductible

Verified 03 December 2021 - Directorate of Legal and Administrative Information (Prime Minister), Ministry of Finance

The VAT-based exemption relieves companies from reporting and paying VAT on the services or sales they perform. This tax regime applies to all companies whose turnover in the previous year does not exceed certain thresholds.

The thresholds indicated are valid for years 2020, 2021 and 2022.

Metropole

Trade

To qualify for the VAT-based exemption, the annual turnover excluding taxes must not exceed:

  • €85,800calendar year previous
  • €85,800 the penultimate calendar year and €94,300 the previous calendar year,
  • €94,300 the current calendar year. If you exceed this threshold, you will have to pay VAT on 1to day of the overrun month.

Example :

A merchant who made a turnover of €82,000 in 2020 can benefit from the VAT-based exemption in 2021, as its turnover is less than €85,800.

If the same trader realises in 2021 a turnover of €88,500, he will be able to benefit from the VAT-based exemption in 2022. He will be able to benefit from it, since his turnover in 2020 was below the €85,800 and its turnover in 2021 was less than €94,300.

Accommodation

To qualify for the VAT-based exemption, the annual turnover excluding taxes must not exceed:

  • €85,800calendar year previous
  • €85,800 the penultimate calendar year and €94,300 the previous calendar year,
  • €94,300 the current calendar year. If you exceed this threshold, you will have to pay VAT on 1to day of the overrun month.

Example :

A lessor who has achieved a turnover of €82,000 in 2020 can benefit from the VAT-based exemption in 2021, as its turnover is less than €85,800.

If the same lessor realises in 2021 a turnover of €88,500, he will be able to benefit from the VAT-based exemption in 2022. He will be able to benefit from it, since his turnover in 2020 was below the €85,800 and its turnover in 2021 was less than €94,300.

Service Delivery

To qualify for the VAT-based exemption, the annual turnover excluding taxes must not exceed 

  • €34,400calendar year previous
  • €34,400the penultimate calendar year and €36,500the previous calendar year,
  • €36,500 the current calendar year. If you exceed this threshold, you will have to pay VAT on 1to day of the overrun month.

Example :

A service provider who has achieved €24,000 in 2020 can benefit from the VAT-based exemption in 2021, as its turnover is less than €34,400.

If the same trader realises in 2021 a turnover of €35,500, he will be able to benefit from the VAT-based exemption in 2022. He will be able to benefit from it, since his turnover in 2020 was below the €34,400 and its turnover in 2021 was less than €36,500.

Professional

Lawyer

To qualify for the VAT-based exemption, lawyers must have an annual turnover of no more than €44,500 the previous year.

They also benefit from the VAT-based exemption when their turnover for their non-regulated services calendar year previous is less than €18,300.

Example :

A lawyer who made a turnover of €42,000 for its activities regulated in 2020 can benefit from the VAT-based exemption in 2021, as its turnover is less than €44,500.

Other Professional

To qualify for the VAT-based exemption, the annual turnover excluding taxes must not exceed:

  • €34,400calendar year previous
  • €34,400the penultimate calendar year and €36,500the previous calendar year,
  • €36,500 the current calendar year. If you exceed this threshold, you will have to pay VAT on 1to day of the overrun month.

Example :

A professional person (other than a lawyer) who has earned a turnover of €24,000 in 2020 can benefit from the VAT-based exemption in 2021. It can do so because its turnover is less than €34,400.

If the same person realises in 2021 a turnover of €35,500, he will be able to benefit from the VAT-based exemption in 2022. He will be able to benefit from it, since his turnover in 2020 was below the €34,400 and its turnover in 2021 was less than €36,500.

Authors and performers

In order to benefit from the VAT-based exemption, an artist must realise an annual turnover of HT for his work delivery activities and the assignment of his copyright is less than €44,500. This mainly concerns the following revenues:

  • Performers' income
  • Income of authors who waive withholding tax
  • Other income other than rights paid by publishers (e.g. miscellaneous income)

Authors and performers also benefit from the VAT-based exemption for their other activities when their turnover calendar year previous is less than €18,300.

Example :

An artist who made a turnover of €42,000 for its activities of delivery of its works and assignment of copyright in 2020 can benefit from the exemption based on VAT in 2021. It can, because its turnover is less than €44,500.

Guadeloupe, Martinique, Reunion

Trade

On an experimental basis, companies in Guadeloupe, Martinique and La Réunion benefit from a VAT-based exemption which exempts them from paying VAT.

Their turnover shall not exceed:

  • €100 000calendar year previous
  • €100 000the penultimate calendar year and €110 000the previous calendar year,
  • €110 000 the current calendar year. If you exceed this threshold, you will have to pay VAT on 1to day of the overrun month.

Example :

A merchant who made a turnover of €82,000 in 2020 can benefit from the VAT-based exemption in 2021, as its turnover is less than €100 000.

If the same trader realises in 2021 a turnover of €108,500, he will be able to benefit from the VAT-based exemption in 2022. He will be able to benefit from it, since his turnover in 2020 was below the €100 000 and its turnover in 2021 was less than €110 000.

Service Delivery

On an experimental basis, companies in Guadeloupe, Martinique and La Réunion benefit from a VAT-based exemption which exempts them from paying VAT.

Their turnover shall not exceed:

  • €50 000 calendar year previous
  • €50 000the penultimate calendar year and €60,000the previous calendar year,
  • €60,000 the current calendar year. If you exceed this threshold, you will have to pay VAT on 1to day of the overrun month.

Example :

A service provider who has achieved €47,000 in 2020 can benefit from the VAT-based exemption in 2021, as its turnover is less than €50 000.

If the same provider realises in 2021 a turnover of €58,500, he will be able to benefit from the VAT-based exemption in 2022. He will be able to benefit from it, since his turnover in 2020 was below the €50 000 and its turnover in 2021 was less than €60,000.

The trader who is covered by the basic deductible must charge his services or sales tax-free.

The

VAT not applicable - Article 293b of CGI: titleContent

must appear on each invoice.

Therefore, VAT cannot be deducted or recovered from purchases of goods and services made for the activity.

The trader can opt out of the basic deductible by opting for VAT.

FYI  

payment of VAT-free purchases delivered outside the EU is 90 days at the latest. This time limit must be specified in the sales contract.

Trade

If the thresholds for VAT-based exemption are exceeded, the exemption shall be maintained in the year of the excess if the turnover does not exceed €94,300.

This is the case for deliveries of goods, sales to be consumed on the spot.

Example :

A merchant who made a turnover of €96,700 in 2020 cannot benefit from the VAT-based exemption in 2021 because it has exceeded the €94,300.

Accommodation

If the thresholds for VAT-based exemption are exceeded, the exemption shall be maintained in the year of the excess if the turnover does not exceed €94,300.

Example :

A lessor who has achieved a turnover of €96,700 in 2020 cannot benefit from the VAT-based exemption in 2021 because it has exceeded the €94,300.

Service Delivery

If the thresholds for VAT-based exemption are exceeded, the exemption shall be maintained in the year of the excess if the turnover does not exceed €36,500.

VAT is then due from 1to day of the month in which the threshold is exceeded.

Example :

A service provider who has achieved €40,700 in 2020 cannot benefit from the VAT-based exemption in 2021 because it has exceeded the €36,500.

Lawyers

The deductible ceases to apply when the current year's regulated activity turnover exceeds €54,700.

Exceeding revenue threshold €22,100 for non-regulated activities, lawyers do not affect the franchise of their regulated activities.

Example :

A lawyer who made a turnover of €56,700 for its regulated activities in 2020 cannot benefit from the VAT-based exemption in 2021 because it has exceeded the €54,700.

Authors and performers

The duty-free regime shall cease to apply where the turnover of the current year exceeds €54,700 for the activities of delivery of their works (authors) and assignment of their rights (performers).

The threshold of €22,100 for their other activities does not affect the franchise they enjoy for the delivery of their works and the assignment of their rights.

Example :

An artist who made a turnover of €56,700 for its activities of delivery of their works and assignment of copyright in 2020 cannot benefit from the exemption based on VAT in 2021. It has exceeded the €54,700.

Exiting the VAT-based exemption system will have the following effects:

  • Submitting to VAT transactions made as from 1to day of the month
  • Transactions which have been completed since the month of overrun and which have not been subject to VAT must be the subject of corrective invoices
  • The right to deduct VAT may be exercised on expenditure incurred as soon as the trader becomes liable for VAT

The trader must obtain VAT number on its invoices to apply VAT to its invoices.

Receipts of services performed before 1to day of the month in which the taxable person becomes liable for VAT do not have to be subject to VAT. This is the case even if they are done after the change in the plan.

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