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VAT exemption

Verified 22 September 2023 - Legal and Administrative Information Directorate (Prime Minister), Ministry of Finance

The exemption from VAT is a VAT system which exempts companies from the declaration and payment of VAT on the supplies or sales they make. This tax regime applies to all companies whose turnover (turnover) for the previous year does not exceed certain thresholds.

In order to benefit from the VAT exemption system, your turnover must not exceed certain thresholds. These thresholds are different depending on the activity you are engaged in.

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Commercial and accommodation activity

To be eligible for the VAT exemption, you must be in one of the following situations:

  • Your sales of thecalendar year previous (N-1) shall not exceed €91,900
  • Your sales for the second-last calendar year (N-2) must not exceed €91,900 and that of the preceding calendar year (N-1) shall not exceed €101,000
  • Your sales for the current calendar year (N) must not exceed €101,000. If you exceed this threshold, you will have to pay VAT on 1er day of the month of overrun

If you have just started your business, you need to adjust your revenue for the year of creation based on your operating time to determine whether you can claim the VAT exemption the following year.

Example :

You've had sales of €82,000 in 2022. For example, you can benefit from the VAT exemption in 2023 because your turnover is less than €91,900.

In addition, if you have a 2023 revenue of €95,500, you will be able to continue to benefit from the VAT exemption in 2024. Your 2022 revenue is below the threshold of €91,900 and your 2023 revenue is less than €101,000, you always meet the threshold of the franchise.

However, if you started your business on May 14, 2022, and you had revenue of €82,000 between may 14, 2022 and december 31, 2022, you must calculate your 2022 revenue pro-rated to your operating time. So for the year 2022, your revenue pro-rated operating time is equal to your revenue multiplied by the number of days in 1 year and divided by the number of days between the creation of your company and the end of the year: (€82,000 x 365)/232 = €129,009.

Your pro-rated revenue is greater than €91,900. Therefore, you cannot benefit from the VAT exemption in 2023.

Service Delivery Activity

To be eligible for the VAT exemption, you must be in one of the following situations:

  • Your sales of thecalendar year previous (N-1) shall not exceed €36,800
  • Your sales for the second-last calendar year (N-2) must not exceed €36,800 and that of the preceding calendar year shall not exceed €39,100
  • Your sales for the current calendar year (N) must not exceed €39,100. If you exceed this threshold, you will have to pay VAT on 1er day of the month of overrun

If you've just start your business, you need to adjust your revenue for the year of creation based on your operating time to determine whether you can claim the VAT exemption the following year.

Example :

You've had sales of €24,000 in 2022, it is less than €36,800 so you can benefit from the VAT exemption in 2023.

In addition, if you have a 2023 revenue of €38,500, you will be able to continue to benefit from the VAT exemption in 2024. Your 2022 revenue is below the threshold of €36,800 and your 2023 revenue is less than €39,100, you always meet the threshold of the franchise.

However, if you started your business on May 14, 2022, and you had revenue of €24,000 between may 14, 2022 and december 31, 2022, you must calculate your 2022 revenue pro-rated to your operating time. So for the year 2022, your revenue pro-rated operating time is equal to your revenue multiplied by the number of days in 1 year and divided by the number of days between the creation of your company and the end of the year: (€24,000 x 365)/232 = €37,759.

Your pro-rated revenue is greater than €36,800. Therefore, you cannot benefit from the VAT exemption in 2023.

Liberal activity (except lawyer)

To be eligible for the VAT exemption, you must be in one of the following situations:

  • Your sales of thecalendar year previous (N-1) shall not exceed €36,800
  • Your sales for the second-last calendar year (N-2) must not exceed €36,800 and that of the preceding calendar year shall not exceed €39,100
  • Your sales for the current calendar year (N) must not exceed €39,100. If you exceed this threshold, you will have to pay VAT on 1er day of the month of overrun

If you've just start your business, you need to adjust your revenue for the year of creation based on your operating time to determine whether you can claim the VAT exemption the following year.

Example :

You've had sales of €24,000 in 2022. It is less than €36,800. You can therefore benefit from the VAT exemption in 2023.

In addition, if you have a 2023 revenue of €38,500, you will be able to continue to benefit from the VAT exemption in 2024. Your 2022 revenue is below the threshold of €36,800 and your 2023 revenue is less than €39,100, you always meet the threshold of the franchise.

However, if you started your business on May 14, 2022, and you had revenue of €24,000 between may 14, 2022 and december 31, 2022, you must calculate your 2022 revenue pro-rated to your operating time. So, for the year 2022, your pro-rated operating time revenue is equal to your revenue multiplied by the number of days in 1 year and divided by the number of days between the creation of your company and the end of the year: (€24,000 x 365)/232 = €37,759.

Your pro-rated revenue is greater than €36,800. Therefore, you cannot benefit from the VAT exemption in 2023.

Lawyer

For your regulated activities

To be eligible for the VAT exemption, you must be in one of the following situations:

  • Your sales of thecalendar year previous (N-1) shall not exceed €47,700
  • Your sales for the second-last calendar year (N-2) must not exceed €47,700 and that of the preceding calendar year shall not exceed €58,600
  • Your sales for the current calendar year (N) must not exceed €58,600. If you exceed this threshold, you will have to pay VAT on 1er day of the month of overrun

If you've just start your business, you need to adjust your revenue for the year of creation based on your operating time to determine whether you can claim the VAT exemption the following year.

For your unregulated activities

To be eligible for the VAT exemption, you must be in one of the following situations:

  • Your sales for the previous calendar year (N-1) must not exceed €19,600
  • Your sales for the second-last calendar year (N-2) must not exceed €19,600 and that of the preceding calendar year shall not exceed €23,700
  • Your sales for the current calendar year (N) must not exceed €23,700. If you exceed this threshold, you will have to pay VAT on 1er day of the month of overrun

If you have just started your business, you need to adjust your revenue for the year of creation based on your operating time to determine whether you can claim the VAT exemption the following year.

Example :

You've had sales of €13,000 for your regulated activities in 2022. It is less than €19,600, so you benefit from the VAT exemption.

However, if you started your business on May 14, 2022, and you had revenue of €13,000 between may 14, 2022 and december 31, 2022, you must calculate your 2022 revenue pro-rated to your operating time. So for the year 2022, your revenue pro-rated operating time is equal to your revenue multiplied by the number of days in 1 year and divided by the number of days between the creation of your company and the end of the year: (€12,000 x 365)/232 = €20,453.

Your pro-rated revenue is greater than €19,600, so you cannot benefit from the VAT exemption in 2023.

Author of a work of the mind or performer (and his successors in title)

For your work delivery and copyright assignment activities:

To be eligible for the VAT exemption, you must be in one of the following situations:

  • Your sales of thecalendar year previous (N-1) shall not exceed €47,700
  • Your sales for the second-last calendar year (N-2) must not exceed €47,700 and that of the preceding calendar year shall not exceed €58,600
  • Your sales for the current calendar year (N) must not exceed €58,600. If you exceed this threshold, you will have to pay VAT on 1er day of the month of overrun

If you've just start your business, you need to adjust your revenue for the year of creation based on your operating time to determine whether you can claim the VAT exemption the following year.

For your other activities:

To be eligible for the VAT exemption, you must be in one of the following situations:

  • Your sales for the previous calendar year (N-1) must not exceed €19,600
  • Your sales for the second-last calendar year (N-2) must not exceed €19,600 and that of the preceding calendar year shall not exceed €23,700
  • Your sales for the current calendar year (N) must not exceed €23,700. If you exceed this threshold, you will have to pay VAT on 1er day of the month of overrun

If you've just start your business, you need to adjust your revenue for the year of creation based on your operating time to determine whether you can claim the VAT exemption the following year.

Example :

You've had sales of €13,000 for your regulated activities in 2022. It is less than €19,600, so you benefit from the VAT exemption.

However, if you started your business on May 14, 2022, and you had revenue of €13,000 between may 14, 2022 and december 31, 2022, you must calculate your 2022 revenue pro-rated to your operating time. So, for the year 2022, your pro-rated operating time revenue is equal to your revenue multiplied by the number of days in 1 year and divided by the number of days between the creation of your company and the end of the year: (€12,000 x 365)/232 = €20,453.

Your pro-rated revenue is greater than €19,600, so you cannot benefit from the VAT exemption in 2023.

The exemption from VAT shall apply to the sales and services of the company which fulfills the turnover conditions. On the other hand, there are a few transactions on which the VAT exemption does not apply.

These operations are as follows:

  • Real estate transaction with the purpose of producing or delivering residential or non-residential buildings (this does not concern real estate works)
  • Real estate transaction for the purpose of delivering to you renovation work of rental housing renovated by landlords (this does not concern real estate work)
  • Transaction carried out by a farmer or a landlord of rural goods who has opted for his transactions to be subject to VAT
  • Transaction subject to VAT due to an option or authorization
  • Intra-Community supply of new means of transport.

To learn more about these operations you can consult the Bofip dedicated to the subject.

Depending on the place of trade, the consequences of the exemption from VAT are different.

Exchanges in France

As a professional who basic deductible, you must invoice your services or sales without VAT, in other words excluding tax.

The mention VAT not applicable - Article 293b of CGI: titleContent must appear on each invoice. If you forget to mention that, in the case of a tax audit, you are liable to a tax adjustment because you did not comply with the administrative formalities.

By benefiting from the VAT exemption scheme, you cannot deduct it from your purchases (goods or services) made in the course of your professional activity.

To be able to deduct VAT on your business purchases, you must opting out of the deductibleVAT-based.

Trade in the European Union

As a trader subject to the exemption from VAT and who makes sales within the European Union, you do not charge VAT to your customers (professional or private).

When you make purchases of goods, they are not subject to VAT as long as the total amount of your acquisitions does not exceed €10,000 year round. As soon as this threshold is exceeded, you are subject to payment of VAT.

However, when you buy provision of services, you must to pay VAT it doesn't matter how much.

As you are subject to the VAT exemption system, you will not be able to deduct VAT on your purchases. To be able to deduct VAT on your business purchases, you must opting out of the deductible VAT-based.

For more information on VAT applicable to trade within the European Union, please consult the relevant fiche.

Trade outside the European Union

As a professional who carries out exports, whether you are exempt from VAT or not, you will not do not charge VAT.

When you perform imports, whether you are exempt from VAT or not, you must to pay VAT. On the other hand, you will not be able to deduct the VAT you paid on your imports. To be able to deduct VAT on your business purchases, you must waive the franchise VAT-based.

For more information on the VAT applicable to imports and exports, you can consult the relevant fiche.

FYI  

You must be vigilant about compulsory particulars of invoices that you issue and that you receive. If the invoice is not in conformity, you may be penalized for a tax inspection.

You can opt to be subject to VAT even though you meet the turnover (turnover) thresholds in order to benefit from the VAT exemption scheme. This VAT option allows you to deduct VAT from your business purchases.

The option to pay VAT is made with the company Tax Office (SIE) on which you depend. You can contact him by e-mail on your professional account of the website taxes.gouv.fr:

Online tax account for professionals (EFI mode)

The option takes effect immediately on 1er day of the month in which it is declared. It shall be valid for a period of 2 years and is tacit renewal.

To give up the option, you must terminate it at the end of a 2-year period. However, if you have received a VAT credit refund, the option will be extended for 2 years and you will not be able to waive it during these 2 years.

The option must be taken from the company Tax Office (SIE) on which the company depends:

Online tax account for professionals (EFI mode)

Example :

A company opts to be subject to VAT on July 4, 2023. It will then be subject to VAT on 1er July 2023 to December 31, 2024.

Depending on your business, the turnover threshold (turnover threshold) at which you are no longer subject to the VAT exemption scheme is different.

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Commercial and accommodation activity

If the thresholds are exceeded, you continue to benefit from the VAT exemption for 2 years unless your sales exceed the€101,000.

If you exceed this tolerance threshold, you no longer benefit from the VAT exemption scheme as from 1er the day of the month in which it is exceeded.

Example :

If you have a turnover of €96,700 in 2022, you were able to benefit from the VAT-based exemption until the end of 2022 because you did not exceed the €101,000.

Service Delivery Activity

If the thresholds are exceeded, you continue to benefit from the VAT exemption for 2 years unless your sales exceed the€39,100.

If you exceed this tolerance threshold, you no longer benefit from the VAT exemption scheme as from 1er the day of the month in which it is exceeded.

Example :

If you have a turnover of €38,700 in 2022, you were able to benefit from the VAT-based exemption until the end of 2022 because you did not exceed the €39,100.

Liberal activity (except lawyer)

If the thresholds are exceeded, you continue to benefit from the VAT exemption for 2 years unless your sales exceed the €39,100.

If you exceed this tolerance threshold, you no longer benefit from the VAT exemption scheme as from 1er the day of the month in which it is exceeded.

Example :

If you have a turnover of €38,700 in 2022, you were able to benefit from the VAT-based exemption until the end of 2022 because you did not exceed the €39,100.

Lawyers

If the thresholds are exceeded, you continue to benefit from the VAT exemption for 2 years unless the turnover of your regulated activities exceeds €58,600.

If you exceed this tolerance threshold you no longer benefit from the VAT exemption scheme as from 1er the day of the month in which it is exceeded.

Exceeding the turnover threshold of €23,700 for your unregulated activities as a lawyer does not affect the application of the VAT exemption scheme to your regulated activities.

Example :

If you have a turnover of €56,700 for your regulated activities in 2022, you cannot benefit from the VAT exemption in 2021 because you have exceeded the threshold of €58,600.

Authors of works of the mind and performers

If the thresholds are exceeded, you continue to benefit from the VAT exemption for 2 years unless your turnover exceeds the threshold of €58,600 for the activities of delivery of your works (authors) and assignment of your rights (performers).

If you exceed this tolerance threshold, you no longer benefit from the VAT exemption scheme as from 1er the day of the month in which it is exceeded.

Exceeding the threshold of €23,700 for your other activities has no effect on the application of the VAT exemption regime for the supply of your works and the assignment of your rights.

Example :

You've had sales of €56,700 for your work delivery and copyright assignment activities in 2022. You have exceeded the €58,600 so you can no longer benefit from the VAT exemption scheme in 2023.

The withdrawal of the exemption from VAT shall have the following effects:

  • VAT assessment of transactions carried out starting on 1er day of the month in which the overrun occurred. So you have to charge VAT to your customers. Invoices issued in the month in which the overrun occurred before the day on which the overrun occurred must be corrected to include VAT. For example, a trader exceeds the VAT threshold on 15 December. He must then charge VAT in December. If it has already issued invoices between 1er and on December 15 without VAT, it must amend them to add VAT.
  • You are now entitled to the deduction of VAT on your business purchases. You can ask the tax authorities to deduct the VAT paid on your business purchases at the time of your VAT return on 1er month of overrun.
  • You must apply for intra-Community VAT number and show it on your invoices. To obtain your intra-Community VAT number, you must contact your company tax department (SIE) on your business account on the website taxes.gouv.fr and inform them of your departure from the VAT exemption scheme:

Online tax account for professionals (EFI mode)

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