In France, as is the case elsewhere across Europe, exemption limits are in place that exclude small businesses from the need to collect or pay VAT on sales and services.
The exemption limits that apply differ by the business activity.
For service and trade-based activities the current limit is €36,800.
For the sales of tangible goods, sales for consumption on the premises or the provision of accommodation services the limit is €91,900.
Under French law it is possible to temporarily exceed these limits (to €39,100 and €101,000 respectively) for two consecutive years (période de tolérance), except in the first year of activity.
There are slightly different rates for authors, lawyers and artists.
Changes are being introduced next year, so that across Europe there are common registration thresholds.
Under the new rules:
The tolerance period will only be permitted for one year.
There is an increase in the exemption limit for service-based activities
There is a decrease in the exemption limit for trading-based activities
Accordingly, from 1st Jan 2025 the following new provisions will apply.
For service providers the turnover must not exceed €37,500 (for 12 months), which may be exceeded for only one year, up to a maximum of €41,250.
For the sale of tangible goods, sales for consumption on the premises or the provision of accommodation services, the exemption limit is €85,000 (for 12 months), which may be exceeded for only one year, up to a maximum of limit of €93,500 during the year.
These limits apply pro-rata in the year the exemption limit is exceed.
Cross-Border Exemptions
In addition to the above changes, next year companies will be able to benefit from the exemption limit, not only in the country where the business is based, but also in other EU Member States, provided they do not exceed an annual turnover ceiling set at European level at €100,000.
As a result, companies whose head office is in France will be able to trade in other Member States under the exemption regime applicable there.
Likewise, companies whose headquarters are in another Member State will benefit from national exemptions, provided that they complete the same formalities in their State of residence.
Finally, companies whose headquarters are located outside of the EU will benefit from this same mechanism, provided they have identified themselves in a Member State of their choice where they are established.
If you seek professional advice concerning anything in this article contact our Property/Tax Clinic and one of our advisors will get back to you.
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