France: Mandatory reverse charge of import VAT

The reverse charge mechanism is widely praised for the simplicity and efficiency it brings businesses and tax authorities alike.

Prior to 2022, an importing party could, with the authorisation of the French Customs Office, pay and deduct import VAT simultaneously in its French VAT return. This meant that the importing party did not have to pay the import VAT to the French Customs office at the time of clearance and then recover it later in their local French VAT return. This process has now become mandatory in France.  Here’s how the new change affects the importation of goods into France.

But first, let's cover the basics. 

What is the reverse charge of VAT import?

The reverse charge of import VAT is a tax regime introduced by the European Union to facilitate trade in international commerce.

This specific VAT mechanism shifts the responsibility of VAT payment from the carrier to the receiving business. In other words, businesses and importers are no longer required to pay VAT on importing goods from third countries. Instead, the company receiving the goods pays the VAT directly to the tax authorities. 

Mandatory reverse charge implementation in France

Before January 2022, B2B DAP (Delivered at Place) shipments would require the France-based company importing goods for resale from a foreign country to pay VAT to the carrier, who would have already paid it to French customs. 

Now, this responsibility has shifted and has been made mandatory for the receiving business in France to pay directly to the tax authorities. However, in the case of B2B DDP (Delivered Duty Paid) shipments, the sender can still assume responsibility for VAT payment but must have a French VAT ID and EORI number. Ultimately, the reverse charge on French B2B imports aims to make VAT management and collection easier for French businesses importing goods and French tax authorities.

What happens if you don't apply the reverse charge mechanism?

Every B2B shipment must have a French VAT number to clear customs with the VAT reverse charge method, as the mandatory reverse charge applies to EU and non-EU businesses shipping into France. In case of a tax audit, any failure to reverse charge shall be subject to a penalty of 5% of the non-reverse-charged VAT amount.

Benefits of VAT reverse charge

Fortunately, the mandatory reverse charge for the import of goods in France brings with it a wealth of benefits, such as: 

• Quicker VAT reclaim

Previously, businesses importing into France would have to claim back their import VAT either through their VAT return or via the 13th Directive. However, with the recent reverse charge change, French Customs authorities communicate directly with the French tax authority, shortening the return period and improving business cash flow. 

• Reduction in manual reporting processes

By utilising the reverse charge, importers can now simultaneously collect and deduct 

the import VAT without paying the carrier and then processing a refund request on their income tax. Moreover, as the French recipient remits import VAT directly to the tax authority, there is no longer a need to file two separate VAT returns. 

Stay in the loop with VAT IT

As your business grows, so does the responsibility of staying up to date with the various rules and regulations regarding VAT treatment. Fortunately, keeping up with the changing VAT rules doesn’t have to feel like climbing Mt. Everest. Stay ahead of the VAT learning curve with VAT IT experts by your side, ensuring end-to-end VAT solutions that are simple, smart and stress-free. 

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