VAT: DEFINITION, RULES AND MANAGEMENT

What is VAT?

French Value Added Tax 
VAT Management System Saudi Arabia is a consumption tax paid by the final consumer on the pre-tax price of his purchase. 

Currently, the VAT rate in France is set at 20%. 

VAT is not calculated in the same way whether it applies to the provision of services or the sale of goods. In the first case, the VAT is declared according to receipts (i.e. payment of invoices). This is referred to as VAT on collection. For the sale of goods, VAT is to be declared when invoicing on delivery, even though the invoice may not yet have been paid by the customer. We are talking about debit VAT. 

• Key definitions to remember
• VAT collected: You charge VAT to your customers. The latter pay you the Value Added Tax and you pay it back to the State. 
• Deductible VAT: when you pay your suppliers, you pay them VAT. This is reimbursed to you by the State.

The VAT payable: This is the difference between the VAT collected and the deductible VAT. If the amount is positive, you must pay this amount to the tax authorities. If it is negative, the administration reimburses you. 

Intra-Community Vat

Intra-community VAT works as follows. In principle, goods sold and services provided from a member state of the European Union to buyers established in another member state are exempt in the country of departure. In return, the intra-Community acquisition is taxed in the country of destination. 

However, exceptions and specificities exist. It is essential to be well informed in order to avoid errors in the application of intra-Community VAT.

Intra-community VAT concerns, in principle, all businesses. It should be noted, however, that certain types of companies benefit from a derogatory regime.

VAT Regimes and Reporting Obligations

VAT exemption 

What Are the Conditions for Benefiting from The VAT Exemption? 

You can decide to opt for the VAT exemption regime. 

To benefit from this scheme, your turnover must be less than 82,800 euros for sales activities and 33,200 euros for service activities. Companies subject to IS are also affected.  

For new companies, the deductible applicable to the first year is as follows: 

• 91,000 euros for sales; 
• 35,200 euros for the provision of services.  

In addition, certain activities are excluded from the benefit of the VAT exemption. This is particularly the case:

• operations under the simplified agricultural regime;
• real estate transactions subject to VAT;
• intra-community deliveries of new means of transport;
• transactions subject to VAT on option.

Finally, certain professions benefit from specific thresholds. These are mainly lawyers, authors of intellectual works and performers.

Good to Know: Why Choose The VAT Exemption Scheme?  

This regime significantly reduces your tax obligations. You are not liable for VAT. You therefore do not have to invoice it, declare it and pay it back. So you save time and money in management. 

However, note that in return, you will not be able to deduct VAT on purchases made by your company.

What Declaration to Make?

You have no statement to make. All you have to do is write the words “VAT not applicable, article 293 B of the CGI” on all invoices intended for your customers.

The simplified regime (RSI)

How to Benefit from It?

To benefit from the RSI, your company must generate an annual turnover excluding tax: 

• between €33,200 and €238,000 for the provision of services and the liberal professions;
• between €82,800 and €789,000 for retail and accommodation activities.

In addition, the annual amount of VAT payable must not exceed 15,000 euros.

What Are Your Reporting Obligations?

In this case, each year, you will have to pay two installments of VAT (in June and December). The balance will be paid during your electronic declaration made “no later than the 2nd working day following May 1, a declaration summarizing all the taxable transactions the previous calendar year and serving as the basis for calculating the amount of the installments”.

Good to know: under the RSI, installments are only due if the amount of VAT exceeds 1,000 euros.

The Actual VAT Regime

When Does It Apply?

Your company is affected by the actual VAT regime provided that:

• its turnover relating to the provision of services exceeds 238,000 euros; 
• its turnover relating to trade and accommodation activities is greater than 789,000 euros;  
• the annual amount of its VAT exceeds 15,000 euros. 

How to declare your VAT under the real regime?

You must declare your VAT monthly on your professional space on the impots.gouv.fr website.

Note however that if the annual amount of your VAT is less than 4,000 euros, you can declare and pay your VAT quarterly.

Why is it essential to properly manage your VAT?

 Avoid Financial Penalties

In the event of errors or delays in the payment of VAT to the State, the financial penalties imposed can be significant and difficult to bear, especially for small and medium-sized enterprises. 

Your VAT management also involves determining your regime as well as taking into account the deadlines and procedures for declarations. Do not get the wrong form and be rigorous in filling it out. Do not hesitate to automate your VAT management or call on an accountant to help you. This will help you avoid mistakes that can cost you dearly.

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