Will these changes to French VAT law affect your business?
From January 1st 2020, the French tax authority will be making digital marketplaces jointly liable for the VAT due by sellers suspected of ignoring their French VAT obligations.
As a new year resolution, France is going on a real hunt for e-commerce fraudsters and online marketplaces are currently in the Government’s line of fire. According to a report published by the Inspection Générale des Finances in November 2019, most non-EU sellers using digital marketplaces to sell goods to French residents are avoiding their VAT obligations. This creates unfair competition for French businesses, who have to account for 20% VAT on their sales. Additionally, it represents approximately €15 billion in lost revenue for France.
According to a 2019 bill, online marketplaces are required to submit to the French tax office an annual statement also shared with their sellers electronically by the 31st January of each year.
This annual statement should include the following information:
- Marketplace contact details
- Seller’s contact details
- Legal form indicated by the user on the marketplace (whether they are a private individual or a registered business for example)
- The number and total gross amount of transactions carried out by the seller during the previous calendar year
- If available, the contact details of the bank into which the seller’s income is paid.
The first annual statement will be due to the tax office by January 31st 2020, and should include the 2019 transactions. Additionally, and according to the act, marketplaces are expected to share with their users clear information on the French tax and legal obligations they might face as well as useful links to be able to comply with these.
How will the French tax authorities proceed?
Moving forward, when the French tax authorities suspect that a digital marketplace seller is escaping their VAT obligations, they can flag this seller to the marketplace, who will be responsible for taking appropriate measures against the presumed fraudster. The marketplace will then need to inform the suspected seller and notify the French tax office with the measures implemented to make the user comply with their VAT obligations.
Should the marketplace fail to notify the tax authorities on time with demonstrated evidence of the actions taken against the seller -such as closing their seller account- and when presumptions of fraud persist after a formal notice, the French tax authorities will then consider the marketplace to be jointly liable for the estimated VAT due by the user. This means that marketplaces are likely to ask their users to upload their French VAT numbers on the platform.
Modernising the VAT rules as part of the EU Digital Single Market strategy.
By targeting digital marketplaces, France is actually anticipating the 2021 VAT e-commerce package that EU member states will need to transpose into their national law. These reforms are expected to come into force in January 2021 and aim to modernise the VAT rules for e-commerce. Among other changes, digital marketplaces will have a greater responsibility in fighting VAT fraud.
The European Commission recognises that the current VAT rules have not been able to keep up with the digital economy and e-commerce boom. By rebooting the VAT system and -among other ambitious changes- creating a new role for digital marketplaces, the EU is hoping to reduce opportunities for fraud and finally create a fair environment where businesses can thrive.
If you have any questions regarding the new French VAT law and how it might affect your business please don’t hesitate to get in touch with our team today!
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This is a post by Louise Boussemart, VAT Researcher at SimplyVAT.com