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03.09.2019

France: VAT liability for online marketplaces and other measures to fight VAT fraud

The measures proposed will be included in the Finance Bill for 2020 and unveiled at the end of September 2019

Key Facts
  • The French Minister proposes to make online marketplaces responsible for the payment of VAT due by non-European merchants on some transactions.
  • French Government plans to delete the VAT exemption for shipments under EUR 22.
  • France wants to introduce an obligation for warehouses to track their logistics flows or even to extend electronic invoices.
Author
Dominique Villemot
Partner
Attorney at law
France | VILLEMOT WTS
> View Profile

European Commission estimates that VAT fraud is costing France EUR 20 billion.

To combat VAT fraud, Minister of Public Accounts, Mr. Gérald Darmanin, accordingly suggests new actions.

First of all, the French Minister proposes to make online marketplaces responsible for the payment of VAT due by non-European merchants on some transactions. France wants to transpose a European directive as early as 2020, even though the Directive does not have to enter into force until 2021.

The proposal includes a VAT split payment requirement. This would oblige marketplaces facilitating payments for non-EU third party merchants to separate any VAT due and remit it directly to the French tax authorities. The online marketplaces will become liable to VAT.

The purpose of this measure is to adapt tax rules to the huge development of e-commerce, which causes a loss of revenue for public finances and unfairness between economic actors. Indeed, some platforms can sell their products at a lower price because they do not apply French VAT, while other companies sell at the same price but keep the VAT for themselves.

Second measure: French Government plans to delete the VAT exemption for shipments under EUR 22.

Indeed, up until now, an exemption allowed imported goods to be exempt from VAT if their value did not exceed EUR 22. However, fraudsters can wrongfully exempt high-value goods, such as tablets or smartphones, by pretending they are low-value items and thus avoid VAT.

Finally, various other measures are planned. Indeed, France wants to introduce an obligation for warehouses to track their logistics flows or even to extend electronic invoices in order to enable the tax authorities to suspend the VAT numbers of fraudulent companies more quickly.

Currently, the measures proposed by the Minister of Public Accounts are only proposals. These proposals will be included in the Finance Bill for 2020 and unveiled at the end of September 2019 so that they can be debated in the fall before the French Parliament. It will be necessary to wait until mid-December 2019 for the final adoption of the text. 

Article published in WTS Global VAT Newsletter Q3/2019
Recent or expected changes in VAT and GST regulations and compliance duties in various EU and third countries
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