This article was first published on Tax@Hand, and is reproduced on this blog with the authorization of its authors.
On 1 January 2022, France will generalize the import VAT reverse-charge mechanism to all operators importing into France. As from this date, the VAT reverse-charge mechanism for imports will become mandatory for all companies importing into France (only non-taxable persons will continue to pay import VAT to the customs authorities).
Under the current regulations, a fiscal importer (liable for import VAT and entitled to recover it) may:
- Under the general rule, pay the import VAT to the customs authorities, which may be recovered under standard conditions; and
- With authorization from customs, self-assess import VAT and recover it on its French VAT return. This procedure entails no cash flow impact (assuming that the fiscal importer has 100% VAT recovery rights).
These new rules constitute a major change for clients established abroad and liable for import VAT in France. It constitutes both an opportunity for foreign operators to avoid any cash-out and a constraint binding them to register for French VAT, if not already done.
Businesses not registered for French VAT will have to apply for a French VAT number. Companies not established in the EU will, in principle, also have to appoint a fiscal representative to carry out VAT declarations on their behalf.
This change might have many implications for companies depending on how their supply chain is set up:
- If a unique person acts both as importer of record (reported in box 8 of the SAD (customs declaration form)) and as fiscal importer, this person will need to register for French VAT, if not already done;
- If roles have been separated, i.e., an importer of record is designated in box 8 of the SAD and another person designated as fiscal importer in box 44 of the SAD, the fiscal importer will have to register for French VAT, if not already done. The importer of record has no VAT obligations arising from imports in France. This situation generally occurs when the owner of the goods (the fiscal importer) is not established in the EU and cannot act as importer of record; and
- Alternatively, supply chains can be modified to limit the number of foreign entities having to register for French VAT, notably intermittent importers.
This last solution should be closely monitored to limit the impact of the decision of the Court of Justice of the European Union in Weindel Logistik (C-621/19, 8 October 2020), which limits the right to deduct import VAT when the fiscal importer is not the owner of the imported products.