This is a hot topic as we are now halfway through the year and some of you may already be reaching the micro-entrepreneur turnover threshold. This blog entry will help you decide, what to do in order to become TVA registered in France. This article applies to any business type in France, that didn’t opt for TVA at the registration stage.
1 - What is TVA - Taxe sur la Valeur Ajoutée
Taxe sur la Valeur Ajoutée stands for Value Added Tax (VAT) in English. TVA is a general consumption tax based on the value added to goods and services. It applies to goods and services bought and sold in the European Union. Companies selling above a certain turnover threshold have to start collecting TVA.
TVA rates in France
- Normal rate : 20% for most goods and services.
- Reduced rate 10% for unprocessed agricultural products, firewood, housing improvement works which do not benefit from the 5.5% rate, camping services, fairs and exhibitions, fairground games and rides, entrance fees to museums, zoo, monuments.
- Reduced rate of 5.5% for food products, female hygiene protection products, equipment and services for the disabled, books, live performance and cinema tickets, improvement works for housing energy consumption.
Words you need to learn
- TVA - Taxe sur la Valeur Ajoutée.
- HT - Hors Taxes - taxes not included.
- TTC - Toutes Taxes Comprises - all taxes included.
- These terms will have to be mentioned on your invoices.
From this point on, whenever you speak about prices, you will always specify “Hors Taxe” or “TTC”, so your customers know the actual total cost. Businesses being TVA registered will want to know about “Hors Taxe”, as they can claim the TVA back. While individuals will want to know about TTC, because who wants to find out there is an extra charge of 20% (i.e. you used HT and it didn’t mean anything to them).
2 - Check when you will go over the turnover threshold.
The turnover threshold varies depending on whether you are providing some services 34,400€ or selling some goods 85,800€. The first confusion at this point comes from the fact that there is a second authorised turnover threshold under which you can still remain non-TVA-registered.
- Services 34,400€
- Goods 85,800€
Authorised turnover threshold leeway (or 2nd threshold):
- Services 36,500€
- Goods 94,300€
I know I might have lost you by now. This basically means that the tax office is going to look at your situation over 2 consecutive years, before deciding if you have to become TVA registered. If you remain within the authorised threshold, you can remain non-TVA-registered the following year. The year after this (N+2), you will have to stay below the first threshold if you want to remain non-TVA-registered.
Let’s take an example: Chris is a proof-reader and translator. In 2019, he makes 32,800€ of sales. In 2020, he goes up to 36,200€. In 2021, he plans to reach 43,000€. Does he have to apply any TVA?
- 2019 with 32,800€ : Below authorised threshold. Chris stays non-TVA-registered in 2020.
- 2020 with 36,200€ : Below the second authorised threshold. He will remain non-TVA-registered in 2021, provided he then remains below the first threshold of 34,400€ this time.
- 2021 with 43,000€: Chris will become TVA registered from above 36,500€. He has to apply for a TVA number and will remain TVA registered from then on.
Let’s take another example: Samantha is a marketing consultant. She launched her business in February 2021 and is already reaching 35,000€ in June. Her next invoice will take her to 41,000€ in July.
- For now Samantha has remained below the second TVA threshold.
- Her next invoice will take her above the second TVA threshold. She has to request a TVA number form the tax office and add the TVA to her next invoice.
To check your TVA threshold, you can use Service-Public, which lets you tick options for trade, services, accommodation, services and authors/artists. This enables you to see your exact turnover threshold, as well as giving you some useful examples.
3 - How to get your TVA number
You need to get in touch with your tax office - Service Impots Entreprises (SIE). You can request your TVA number online, by login in your business http://www.impot-gouv.fr account. Log in, go to your email box “messagerie”, type new message “Ecrire” and in the drop-down menu, select the title “TVA et taxes annexes / Je demande un numéro de TVA intra-communautaire”.
In this email, you have to inform the tax office, when you will go over the TVA threshold (i.e. which month), ask for your TVA number to be issued and inform them about which “TVA Regime” you want to go for - mini réel, réel simplifie or réel normal.
It’s important that at this point, you already know which TVA regime you want to go for or they may automatically chose régime réel simplifié for you (as this is the most common choice). I would recommend that you see an accountant to discuss your TVA options. Which regime is best for your business situation? Will you handle the TVA declarations or have the accountant do this for you? If your customers are abroad, do you need to do any extra declarations (UK, declaration Pro-douane)? Which information do you need to gather for your accountant every month? As you can see, you cannot guess this…
4 - Different TVA regimes in France
En franchise the TVA
This is when you are not TVA registered, like micro entrepreneurs for instance. All business types could decide not to be TVA registered to start with. You can only be under this regime if your yearly turnover is:
- < 34,400€/year for services.
- < 85,800€/year for goods.
- You will add the mention “en franchise de TVA, art. 293b CGI” on your invoices.
TVA Regime mini reel
This regime applies to people who prefer to do a simplified monthly TVA declaration and pay their TVA on a monthly basis. This is done online using the TVA C3 declaration in your business www.-Impot-Gouv.fr account. At the end of each month, you will log in to declare your sales, how much TVA you have collected, how much TVA you have paid, validate the amount due, then pay your TVA by direct debit by 19th of this same month.
—> Impot has a good video showing you how to complete your TVA C3 declaration.
TVA Regime reel
Regime de TVA reel simplifie is for businesses providing :
- Services and selling for less than 247,000€/year.
- Goods for less than 818,000€/year.
- You can also decide to opt for this regime from day one.
This TVA tax regime is based on:
- 2 semi-annual VAT installments called “acompte semestriel de TVA” due during the year. The first one in July and the second in December.
- A yearly declaration is filed by your accountant to assess your actual situation. A lump sum amount is also paid if needed. This yearly declaration is called “déclaration CA 12” and is based on a calendar year. Your accountant could align the VAT declaration with your accounting year if it doesn’t coincide with the calendar year.
New businesses, without a reference against which to calculate the initial TVA installments, must determine these amounts by themselves… hence the need to work with an accountant to get this right.
TVA regime normal
Regime de TVA reel normal is for businesses providing :
- Services and selling > 247,000€/year.
- Goods for > 818,000€/year.
- You can also decide to opt for this regime from day one.
I won’t expand on this one, as this rarely applies to my blog readers and customers.
I strongly recommend that you see an accountant to chose your TVA regime.
5 - Plan your move to become TVA registered
My best advice is to keep a track of your turnover, to avoid realising that you should have been charging TVA to your customers a few months ago. Trust me, this happens… In that case, you will have to re-issue your invoices to show the TVA. This means that you are likely to take the TVA increase as a cut in your margin (i.e. if the customer refuses the increase, you are out of your pocket).
Plan ahead when you will go over the TVA threshold, as all invoices issued in the month that you become TVA registered, will all need to include TVA. You might for instance want to split an approved quote into two invoices, so you have one part without TVA and the other with TVA.
Up-date your invoices to include your TVA information, i.e. the legal mention referring to your TVA regime (en franchise de TVA, numero de TVA). If you are working with businesses, you will also need to ask for their TVA information to add to your invoices.
I will write another article on TVA shortly to cover TVA in Europe. This will be an introduction, so be sure to get in touch with an accountant too if this is your situation.