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France: VAT measures enacted in finance laws

France: VAT measures enacted in finance laws

In France, two laws—known in English as the “Finance Act for 2017” and the “Rectified Finance Act for 2016”—and their tax-related measures were finalized with publication in the official gazette (Journal Officiel) on 30 December 2016.


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The finance laws include the following value added tax (VAT) measures.

Paper invoice archiving

A provision (Article 16 of the Rectified Finance Act 2016) clarifies that by 31 March 2017 (at the latest), purchase and sale invoices issued originally on paper can be stored in electronic format (PDF scan, etc.). Previously, all original invoices received on paper had to be stored in hardcopy format for a period of six years. This measure will simplify electronic archiving procedures, and allow storage of invoices in electronic format only.

VAT credit reimbursement claims, audits

A provision (Article 17 of the Rectified Finance Act 2016) allows the tax authorities to conduct audits of taxpayer claims for VAT credit reimbursements “on site” (at the taxpayer’s location). 

The rules for these audits also include certain time limits for actions by the tax authorities. The rules provide a period of 60 days for a decision, but allow a maximum period of four months after the date when the examination notice is sent for a decision to be granted on the taxpayer’s VAT credit reimbursement claim. This VAT audit procedure is not an accounting audit. Also, a taxpayer-favorable VAT credit reimbursement decision cannot be asserted against the tax authorities during a subsequent audit. 

Moreover, if the tax authorities do not reach a decision by the end of the 60-day period or four-month period, the reimbursement claim will be deemed to have been implicitly accepted.

VAT on petrol

A provision (Article 31 of the Finance Act 2017) repeals an exclusion of the right to deduct VAT on petrol (gasoline). The VAT regime applicable to petrol that is used as fuel will gradually be brought into line with the regime for diesel over a period of five years and six years.

  • For individual vehicles—the deduction for VAT on petrol will be increased to 10% in 2017, 20% in 2018, 40% in 2019, 60% in 2020, and 80% in 2021.
  • For utility vehicles—no deduction will be allowed in 2017. However, 20% may be deducted on 1 January 2018, 40% in 2019, 60% in 2020, 80% in 2021, and lastly 100% in 2022.   

VAT reverse-charge mechanism for imports

Under a provision (Article 87 of the Rectified Finance Act 2016), the authorization mechanism for the reverse-charge of VAT on imports has been adopted without modification. In order to benefit from this regime, it is now essential to submit an authorization request to the customs administration and to meet the four conditions set out by new Article 1695 of the French tax law.

Miscellaneous measures

Other VAT-related measures in the new finance laws include:

  • Introduction of a mandatory approval process for tax refund operators (Article 87 of the Rectified Finance Act 2016)
  • Application of the reduced 5.5% rate to HIV self-testing kits (Article 61 of the Rectified Finance Act 2016)
  • Application of the reduced 5.5% rate to deliveries of constructible land or buildings to a “solidarity land organization” (Article 62 of the Rectified Finance Act 2016)
  • Application of the reduced 5.5% rate to accommodation and social support services provided in hotel residences for social purposes (Article 29 of the Rectified Finance Act 2017)
  • Extension of the application of the reduced 5.5% rate to deliveries of property with respect to home ownership operations for properties built in neighborhoods covered by a national urban renewal program and located less than 300 meters from the boundary of such neighborhoods
  • Creation of a “C3S advance payment” to be paid on 15 December of year N for businesses whose turnover N-1 is higher or equal to €1 billion

Rejected provision

One provision concerning a mechanism for reporting purchases (proposed to be added to Article 105 of the Rectified Finance Act 2016 by an amendment of the Finance Commission and against the government’s opinion) was rejected by the French Constitutional Court (Conseil Constitutionnel). The challenged measure would have imposed a 1% penalty (not subject to a cap) and a mechanism for the declaration of purchases over €863,000 via an IT platform, within 24 hours of completion of the purchase. The penalty measure was found to be disproportionate because the person subject to the penalty could not always to have known that its co-contractor did not pay the VAT.


For more information, contact a tax professional with Fidal* in France or with KPMG in the United States:

Laurent Chetcuti | +33 (0) 1 55 68 14 47 | 

Arnaud Moraine | +33 (0) 1 55 68 19 30 |

Patrick Seroin | +1 (212) 954 2523 |   


* Fidal is a French law firm that is independent from KPMG and its member firms.

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