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La Intra-community VAT allows you to maintain a commercial relationship with customers or suppliers established in another country of the European Union, who must have an identification number useful for billing.
It is therefore essential to understand how intra-community VAT works. What rules apply to businesses in the European Union? What activities are subject to VAT in the EU? How do I file a VAT return?
Let's take a closer look at it.
All businesses in the European Union (EU) subject to VAT have an individual tax identification number. It is granted by the tax service of the country where she resides. It is necessary for the company to incorporate this figure both in its commercial documents (invoices, quotes, etc.) and administrative documents (VAT return, etc.).
Source - Department of Legal and Administrative Information (Prime Minister) - March 14, 2023
The intra-community VAT number was created to make commercial transactions between businesses established in the European Union simpler. The intra-community VAT number is a unique identification number.
In detail, every European company receives a VAT number the same for all member countries of the European Union. This number in France consists of the letters FR, a 2-digit code and the company's SIRET number. The tax authority provides it at no cost.
So, the intra-community VAT number makes it possible to identify any European company subject to VAT and simplifies the procedures with the tax authorities for monitoring and reimbursing VAT. Thus, using an online process simplifies declarations.
When a company sells or buys services from companies established in the European Union or when the amount of purchases made in the European Union exceeds €10,000 per year, it is required to register with the tax authorities.
It is granted by the tax authority of the country where the company is registered: content of the company at the time of its registration (micro-entrepreneur, individual entrepreneur, company).
A company liable for VAT and established in an EU Member State must have an intra-community VAT number.
If the company is subject to VAT but is not liable or does not have to pay it, it can request a intra-community VAT number. This can be observed in the case of a business that is subject to the franchise system under VAT.
As a general rule, a business that is exempt from VAT is not required to have an intra-community VAT number. However, when the company makes acquisitions (purchases) in the EU of a value greater than €10,000 per year Or that she sells or buys services for companies established in the EU, the number is required.
If a company applies for an intra-community VAT number, it does not lose the benefits of the VAT exemption regime.
When a company needs to trade with another partner based in the EU, this is one of the most frequently asked questions. A SIREN number is used to identify all businesses in France. This should not be confused with a company's intra-community VAT number. Here's how to do it.
In France, the tax service can provide the intra-community VAT number free of charge if you ask for it. Therefore, it is appropriate to contact the SIE to obtain a business number.
You have to wait about ten days to get a tax document in the form of a memento (it is important to keep it). The FR code indicates the country where your head office is located. Then there is the intra-community VAT number, which consists of a 2-digit computer key and a 9-digit SIREN number for the company.
If you need to know your number in this interval, be aware that many simulators available on the Internet allow you to calculate it automatically. However, only the official statement is reliable.
When the company is registered, the SIE automatically transmits the intra-community VAT number to it.
The commercial and administrative documents of the company must contain the VAT number.
The assignment of an intra-community VAT number is not automatic if the company is not subject to the payment of VAT.
For example, intra-community VAT numbers are not automatically assigned to the following businesses:
When the company is in one of the following circumstances, it is required to contact the Business Tax Service (SIE) on which it is dependent to obtain an intra-community VAT number:
By using the messaging system of its professional account on the site impôt.gouv.fr, the company must request an intra-community VAT number online.
=> Online tax account (EFI mode) for professionals
To avoid fraud and scams, businesses that have commercial relationships with customers or suppliers in the European Union can check the validity of an intra-community VAT number.
The easiest way is to ask your company's business partner for their VAT number.
The European Commission's VIES system can be used to check the intra-community VAT number of your service provider or customer in order to secure your transactions.
The following online service can be used to perform this verification of an intra-community VAT number
It is advisable to check the intra-community VAT number on the invoices before each transaction.
If the European partner has an invalid intra-community VAT number, it must present a certificate of liability from its tax administration. If this is not the case, it will be subject to VAT in France.
In the event of an error on the partner company number, it must contact its tax authorities to regularize the number. When the partner company is located in France, the company's tax department is responsible.
There is no European database that can identify a company's VAT number based on its name or corporate name.
In certain circumstances, a company's intra-community VAT number may be invalidated. The tax authority notifies the invalidation with the reason for the invalidation.
1. Spreading false information
If a company has provided false information to the tax authorities to obtain an intra-community VAT number, its number may be invalidated.
2. No changes have been submitted.
If a company does not transmit its data changes, its intra-community VAT number may be cancelled.
3. A company that has committed VAT fraud
When the company cannot ignore or be aware of being involved in VAT fraud in France or the European Union, the intra-community VAT number may be invalidated. These conditions are as follows:
It does not respond to the tax administration's request for regularization within 30 days, due to declarative failure, failure to file the VAT summary statement, etc.
When it is found that it has transmitted inaccurate information on a repeated basis, it does not respond within 15 days from the notification of the breaches.
It impedes the smooth conduct of fiscal control or the right of investigation (which allows customs and tax officials to search for breaches of the VAT billing obligation, such as false or false invoicing).
Example: VAT fraud consists of creating a fictional company to collect VAT and then dissolving it to avoid returning it to the State.
4. The lack of respect for representation
It is necessary for a company outside the European Union that carries out transactions subject to VAT to appoint a fiscal representative. This representative is responsible for carrying out tax reporting responsibilities. If this company does not comply with its duty of representation, the VAT number may be cancelled.
When the company meets one of the following conditions, the intra-community VAT number that has been invalidated is restored immediately.
Transactions between taxable businesses and individuals residing in European countries are subject to VAT. In detail, this concerns:
It should be noted that businesses benefiting from an derogatory regime are not affected because of their VAT exemption. They are then identified as PBRD (persons benefiting from an exceptional regime). The same is true for self-employed entrepreneurs and micro-entrepreneurs.
Intra-community VAT works the same way in all EU countries. However, the tax rate for a good or service may vary by country.
When both trading partners establish themselves in the European Union, the general rule is as follows:
When you sell a good or a service to one of the EU countries from France, these sales are exempt from VAT in France. However, the purchaser of the good or service will have to pay VAT at a rate determined by the country of origin. The seller must know the buyer's VAT number to be exempt from intra-community VAT, have proof of shipment outside France and ensure that the buyer does not benefit from the derogatory regime.
In France, VAT is applicable to purchases made to a service provider established in another EU country.
In France, the VAT exemption measures are almost identical. In summary:
The declaration of exchange of goods (DEB) and the declaration of exchange of services (DES) are the two types of mandatory declarations depending on the nature of the transaction. It will thus be possible for all accountants to ask you if VAT is applied to your invoices and if they comply with the General Tax Code.
The monthly DEB declaration concerns companies headquartered in the EU that trade goods. Thus, the companies involved must inform the customs service about intra-community deliveries and acquisitions of goods every month within ten days.
The amount of transactions carried out during the previous calendar year determines the reporting requirements:
All transactions involving the exchange of Community goods, i.e. those that circulate between France and another Member State, must be mentioned in the goods exchange declaration.
This statement concerns companies that provide services to a client company established in another EU country. From the first euro, it is necessary to file the DES at customs.
This statement uses the same template as the goods exchange statement to summarize all customers to whom services were provided. The DES model can be obtained on the Customs website.
The European declaration of services must be submitted no later than the tenth day of the month following that in which VAT became payable in the other Member State of the European Union.
The reverse charge of VAT is an derogatory regime that allows the client company to pay the amount of the invoice excluding tax to the supplier and to pay its own VAT to its tax authorities.
For example, a Spanish business that sells products to a French company must provide an invoice that includes French VAT.
However, he can charge this Spanish company an amount excluding tax to his French customer thanks to the reverse charge of intra-community VAT. The invoice must then be marked “reverse charge of VAT” and the French company must pay its own VAT to the French tax authorities.
In all EU countries, the reverse charge of intra-community VAT is applicable.
In some cases, it is possible to recover foreign VAT on the international travel expenses of employees.
It is possible to recover VAT in 36 countries, in the same way as the VAT deductible for certain expense reports in France. The nations included are not only those in the European Union but also Bosnia-Herzegovina, Iceland, Israel, Montenegro, Macedonia, Norway, Switzerland, and Serbia.
To obtain foreign VAT, it is necessary to meet three requirements:
As you will have understood, it can become very difficult to manage intra-community VAT procedures on a daily basis. It is important to make numerous accounting entries and to gather all the necessary supporting documents.
Businesses can get rid of many time-consuming tasks thanks to paperless accounting, allowing finance teams to focus on high value-added tasks.
Buy Made Easy provides you with a turnkey solution to manage your intra-community VAT, contact us to discuss.
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