VAT. The Minister of the Economy Bruno Le Maire wanted to clarify the position of the executive vis-à-vis the VAT rates, and respond to the latest media release from the head of Nupes, Jean-Luc Mélenchon.
[Mis à jour le 15 juin 2022 à 16h42] During the first round of the legislative elections and in particular on election night, Jean-Luc Melenchon spoke about a possible “hidden part” of the majority programme. The leader of Nupes insinuated in particular a program financed by “increased VAT”. Remarks which did not fail to react, this Wednesday, June 15 in the camp of the majority, and in particular the Minister of the Economy Bruno the Mayor. The latter spoke firmly at the microphone of France Inter this Wednesday, June 15: “I am committed, there will be no increase in VAT”. Words that confirm his intervention yesterday, Tuesday June 14 on the set of BFMTV: “I want to deny with the most extreme firmness this intervention” of the Nupes. “We have no intention of increasing VAT rates.”
As a reminder, VAT is a tax of which you may have little awareness on a daily basis, and yet it represents a hell of a fortune for the state coffers. Value added tax is a general consumption tax. In total, VAT brings in 212 billion euros, i.e. double the revenue generated by the collection ofincome tax. Of these 212 billion euros, 163 billion euros land directly in the coffers of the State, while 45 billion are for the “benefit of various organizations” and 4 billion land in the coffers of local authorities. VAT was introduced in the 1950s in France, in an effort to simplify, in order to reduce the burden on businesses. Since then, many countries have copied France, in turn implementing a VAT. Read on to learn more about this tax!
In France, there are several rates of value added tax. Linternaute.com summarizes them for you:
- The normal rate: 20%. It concerns the majority of sales of goods and services. Take your last receipt, for example. You will see, below the total of your invoice, the VAT rate and the amount deducted for this purpose.
- The intermediate rate: 10%. It applies to unprocessed agricultural products, but also to firewood and home improvement works. Certain services (campsites, fairs, exhibitions, games, etc.) are also concerned.
- The reduced rate: 5.5%. It concerns “most food products, feminine hygiene protection products, equipment and services for the disabled, books on all media, gas and electricity subscriptions, supply of heat from renewable energies, supply of meals in school canteens, live performance and cinema ticketing, certain imports and deliveries of works of art, work to improve the energy quality of housing, social or emergency housing, home ownership”, can we read on the page dedicated from Ministry of Economy.
- The particular rate: 2.1%. It only applies to medicines reimbursable by Social Security, to the TV license fee, or even to certain shows.
Note: special rates apply in Corsica and in the overseas departments.
In the European Union, VAT rates also apply, in each country. This is called intra-community VAT. “The EU has established harmonized rules on VAT, but these may be applied differently in different countries”, explains one on the dedicated portal. “In most cases, VAT is due on all goods and services at each stage of the supply chain, including the sale to the final consumer.” The normal rate cannot be less than 15%.
When a company acquires goods and services in another EU country, it must pay intra-community VAT.
Note: not to be confused with the intra-community VAT number which corresponds to an individual identification number assigned to a company subject to VAT and domiciled in the EU. “The intra-community VAT number makes it possible to facilitate and guarantee commercial transactions between companies in the European Union”, we explain on the dedicated page of the Ministry of Economy. “It identifies the companies concerned, simplifies customs procedures as well as the monitoring and reimbursement of VAT under deductible VAT”.
The applicable VAT rate depends the nature of the activity and the goods and/or services. Your company markets goods or services, and you are looking to calculate the price excluding taxes (HT) and all taxes included (TTC), including VAT? Be aware that a dedicated converter has been posted on public service website. All you have to do is enter the amount excluding or including tax, then the corresponding VAT rate (20%, 10%, 5.5%, 2.1%, etc.).
Catering activities and the sale of prepared food products intended for immediate consumption are subject to the intermediate rate of VAT, at 10%. Note: the “catering and sale of prepared food products sold in packaging allowing them to be preserved”, are subject to the reduced rate of 5.5%.
Self-employed entrepreneurs are micro-enterprises. Therefore, they do not charge VAT, because they benefit from the “VAT-based franchise” scheme. Value added tax cannot therefore be deducted. It is possible to be liable for VAT in the following situations:
- You opt for the actual VAT tax regime, and can therefore deduct it.
- You exceed the deductible thresholds based on VAT
“As soon as you lose the benefit of the VAT-based franchise, you must report it to your business tax department, which will then allow you to declare and pay VAT in your professional space”, we recall. on the dedicated tax page for professionals.
The company collects VAT for the State on the sales it makes. In return, it must deduct VAT from its operating expenses. This is called deductible VAT. For this, several conditions must be met:
- Have proof of the VAT to be deducted
- Goods or services purchased by the company for its operation must have been acquired for operation, and not for personal use.
- VAT must be deducted as soon as it has become due from the supplier.
Please note that some products are excluded.
The company that collects VAT for the benefit of the State must complete a declaration. The corresponding form depends on the tax regime (basic deductible, simplified tax regime, normal real regime). You can find it on the tax website.