Everyone knows this tax, it is even the first source of income for the French State. But who is actually liable for VAT? In this article, we will cover this topic in detail. How to calculate it? And what are the different VAT rates?
VAT: main source of revenue for the state
The value added tax is a general tax on consumption and it is the tax which brings the most in the public accounts. In France, the principle of VAT has existed since 1954 and was codified in its current form in 1967 with the first VAT directive, since its introduction it has gone from 17.6% to 20%. All the essential VAT rules are set by the General Tax Code (CGI).
Who is subject to VAT?
With a few exceptions, all goods and services provided by a company against payment in France are subject to value added tax. So, if you are self-employed and require payment in exchange for a service or as a result of the sale of a product, you usually need to charge and collect VAT.
Ultimately, value added tax is paid by the end consumer. Depending on the type of product or service and the sector, 20, 10 or 5.5 and even 2.1% are added to the net price. This means that the end consumer pays VAT automatically. For businesses, however, value added tax is only a transitional element. They have to collect VAT, and like any other consumer, they also pay VAT on goods and services purchased, necessary for production. However, they have the right to recover the amount of VAT from the tax office (or to deduct it from the amount of VAT collected). For filing business taxes you need to understand the followings now.
Example: a service provider sells a service worth 100 euros. He is subject to a normal VAT rate of 20%, that is to say he must invoice 120 euros to his customer. However, he cannot keep the tax of 20 euros, but must transmit this amount to the tax authorities. But if the same service provider bought a new printer for $ 50, they can claim the $ 10 value added tax as deductible VAT, so they get it back. In the end, he does not pay 20 euros to the tax authorities, but only 10 euros.
Each entrepreneur must therefore add VAT to their prices (but there are some exceptions). Consumers ultimately pay this tax and entrepreneurs collect and transfer the amount to the tax authorities, usually quarterly as part of the VAT return.
Normally every business has to calculate and declare VAT. However, there are exceptions, especially for small entrepreneurs, but only under certain conditions. Indeed, it is possible to apply the deductible on a VAT basis only if your turnover for the previous calendar year is less than 82,800 euros for the activities of purchase-resale, sale to consume on places and services. housing, 33,200 euros for other commercial and non-commercial services and 42,900 euros for the regulated activities of lawyers and attorneys, transactions relating to intellectual works, as well as certain activities of authors. interpreters.