Under provisions of French tax law, value added tax (VAT) incurred on purchases of goods is not deductible when it is demonstrated that the amount of VAT due on the purchase is not being paid. If the tax administration can show that purchaser must have known about the fraud committed by the supplier, the tax authorities can “reclaim” the amount of VAT that was deducted as well as impose penalties (40% for an intentional violation and 80% in instances of fraud).
Companies that want to limit their risk with respect to a “carousel-type fraud” need to consider a non-exhaustive list of factors that the French tax administration recently published.
Read a December 2015 report [PDF 35 KB] prepared by Fidal* tax professionals: VAT carousel fraud: How to recognize risky suppliers?
* Fidal is a French law firm that is independent from KPMG and its member firms.
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