France: VAT group simplification from 2023

Starting January 2023, France will introduce the full VAT group simplification regime. The new ruling will allow VAT groups to be treated as a single taxable person. So, how will the extended scope impact your business, and what does a full VAT group regime entail apart from administrative simplification? 

In this article, we're looking at how France will implement the new full VAT group regime, and if (and how) other EU member states are following suit. 

The new VAT group regime in France

Before the confirmed 2023 VAT regime update regarding VAT grouping, French companies were only allowed to opt for administrative simplification for VAT groups and intra-group supplies were not disregarded for VAT purposes. A cash flow advantage for groups of companies was created by simplifying the process and consolidating all VAT due into one payment. 

However, even within the simplified administrative process, VAT groups were still not treated as a single taxable person. Due to this, intra-group supplies were still regarded for VAT purposes. 

As a result, each entity within the VAT group still had its own VAT obligations, and they were required to file their own VAT return and issue invoices from their VAT number. 

However, the new VAT regime specifies the following: 

• Only French-established businesses are eligible to be part of a VAT group.
• Although intra-group transactions are disregarded for VAT purposes, groups must still keep records of these transactions.   
• Once approved as a VAT group, French authorities will grant the group a group VAT number.
• Invoices must include specific wording and the name, address, and individual and group VAT numbers. The wording can state: “Membre d’un assujetti unique”.

The new VAT grouping regime is optional. If companies meet the requirements, they can choose whether or not they'd like to apply for a VAT group or remain separate VAT entities. However, it should be noted that there is a cut-off date for applying for a VAT group. The closing date will be on 31 October for January of the following year. 

What to know before applying for a VAT group in France

Although simplified processes are always welcome in the world of VAT, there are a few things to keep in mind when considering applying for a VAT group in France.

Penalties and debts: 

As a member of a VAT group, all group members will be equally liable for any debts and penalties of the entire group. 

Time commitment: 

A French VAT group must be in existence for at least three years. After the initial three-year period, entities may enter or leave the group with the consent of the representative.

VAT recovery:

Regarding VAT recovery, each member would still be considered a separate business unit.

VAT group simplification across the EU

France and Poland are the most recent EU member states to confirm VAT group simplification rules. VAT grouping in Poland is also expected to come into effect during 2023. Additional countries that provide VAT grouping include; Germany, Spain, Italy, Netherlands and Sweden. 

Simplified and secured compliance with VAT IT

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Reach out to our VAT compliance team to prepare for an easy, simple and confident new year regarding VAT.