France: Software and cash-desk conformity measures | KPMG | GLOBAL

France: Software and cash-desk conformity measures, VAT collection and reporting

France: Software and cash-desk conformity measures

“Proof of conformity”—that is, evidence that businesses are complying with value added tax (VAT) collection and reporting rules—has been requested by French tax inspectors during recent tax audits.

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Background

There are conservative estimates that the “VAT gap” (the amount that the French Treasury is not collecting) is €15 billion annually. To address the VAT gap, beginning 1 January 2018, all VAT payers established in France must, on entering into transactions with their customers and using a software or cash-desk system to record the sale or service, comply with new requirements on VAT conformity—specifically unalterable, secure storage and archiving of records of the transactions.

These new measures apply to companies that are engaged either in business-to-consumer transactions or in certain business-to-business transactions.

Recent developments

There are reports from the food and retail sectors that French tax inspectors have been requesting “proof of conformity” with the VAT rules. The law provides two methods to demonstrate conformity with the VAT rules:

  • An attestation from the software editor
  • A certification from an accreditation body

KPMG observation

During 2018, the French tax authorities are not supposed to use “unannounced audit procedures,” but they can verify if the VAT payer has possession of a “proof of conformity” during the course of a normal tax audit. Given current information about discussions at the work-group level, and also in anticipation of upcoming modifications of guidelines from the French tax authorities, some aspects are still unclear and may need adjustments in the coming months—specifically concerning:

  • New requirements that impose a significantly greater burden on software as a service (SaaS) providers due to “the path” of change to the solution (a proof of conformity will only remain valid as long as the solution is not modified) and thus would constitute a “major version” modification to the guidelines.
  • Software integrators may risk being seen as software editors in the eyes of the French tax authorities, even in situations when they do not effectively control the solution.

The French tax authorities have responded favorably to requests to validate “the path” to conformity of certain businesses, thus securing the business’s position and liabilities.

For software editors, these requirements (and sanctions in instances when there is an absence of proof) will apply at the level of the French users. For foreign software editors, it appears that it would be nearly impossible to sell software / point of sales (POS) / cash-desk systems that do not meet the new standards and that do not allow for proof of conformity because customers will require either (1) the appropriate attestation or (2) the proof of certification in order to avoid being subject to sanctions or penalties. 

Some may view the new requirements as offering certainty and a level of comfort for software editors—notably in light of their great responsibility. Since 2014, software editors have been subject to rules that may include significant tax penalties and even criminal fines when providing “unsecure systems allowing fraudulent manoeuvres.”

 

For more information, contact a tax professional with Fidal* in France or a tax professional with KPMG’s French Tax Desk:

Laurent Chetcuti | + 33 (0) 1 55 68 14 47 | laurent.chetcuti@fidal.com

Patrick Seroin | +1 (212) 954-2523 | patrickseroin@kpmg.com

François Warcollier | + 33 (0) 1 55 68 15 06 | francois.warcollier@fidal.com

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

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