Businesses wishing to expand their activities in France must take into account the differences in value-added tax (VAT) regulations between mainland France and the country’s overseas departments and territories, also known as the DOM-TOM. The differences are particularly important to understand for trade between these territories. This article discusses key elements of VAT legislation that businesses wanting to establish themselves in the global French market need to know.

What’s in this article?

• VAT in the DOM-TOM
  
• Who is affected by VAT in the DOM-TOM?
  
• What are the applicable VAT rates?
  
• What are the VAT exemptions in the DOM-TOM?
  
• How to invoice for VAT in the DOM-TOM?
  

VAT in the DOM-TOM

The overseas departments (DOM) are an integral part of the French Republic, as they have representation in the French Parliament and are subject to France’s laws. The five departments include Martinique, Guadeloupe, and Réunion—where the standard VAT rate is 8.5% and the reduced rate is 2.1%—and Mayotte and Guyana, which are excluded from VAT.

The overseas territories (TOM) are under French sovereignty but are not an integral part of the Republic. They include the French Southern and Antarctic Lands.

All DOM-TOM are considered VAT exempt by the European Union (EU).

Who is affected by VAT in the DOM-TOM?

VAT imposes specific obligations on businesses in France operating in the DOM-TOM.

Sales of goods

There is a fundamental difference between sales of goods to the DOM-TOM and transactions made within these territories. The former are generally exempt from VAT, while the latter are subject to DOM-TOM VAT.

A company in mainland France selling a product in Martinique, for example, will not invoice for VAT. Conversely, a Martinique-based company making a sale within its own territory is liable for VAT in Martinique.

Sales of business-to-consumer (B2C) services

When a B2C service provider in France invoices an individual in mainland France or a DOM, VAT is applied at the rate that is in effect in the provider’s location. For example, a Guadeloupe-based company invoicing a Parisian individual would apply Guadeloupe’s VAT.

Certain geographically specific services provided to nontaxable persons are subject to the VAT rate applicable in the persons’ respective locations. These services are mainly related to transportation and travel rental services.

Sales of business-to-business (B2B) services

When sales of services occur between businesses that are subject to VAT (i.e., B2B transactions), the VAT is based on the customer’s place of residence. As a general rule, the VAT rate in the customer’s country applies.

For example, a web developer in Martinique invoicing a company in Marseille would apply the mainland rate. As with B2C trade, certain services, such as vehicle rentals or passenger transport, are subject to the VAT of the place where the service is performed. France’s public service website provides an exhaustive list of exceptions.

The VAT rate applicable between the DOM-TOM and Mainland France

What are the applicable VAT rates?

Regardless of the VAT regime chosen, businesses must be aware of the specific rates used in the DOM-TOM that distinguish them from those of mainland France.

The standard VAT rate in the DOM

The standard rate for DOM markets is 8.5% for goods and services, unless otherwise specified. So businesses that conduct transactions between Martinique and Guadeloupe, for example, are subject to the 8.5% VAT rate. In mainland France, on the other hand, the standard rate is 20%.

The reduced VAT rate in the DOM

The DOM’s reduced rate of 2.1% applies to specific goods, such as medicines and hygiene products. A list of the products and operations that are subject to this VAT rate in Guadeloupe, French Guiana, and other DOM is available on the BOI website.

Specific rates

There are specific rates in the DOM that can affect certain businesses. For example, sales of animals intended for butcher shops or delicatessens to individuals are subject to a reduced VAT rate of 1.75%. For shows and publications, a certain number of performances or issues benefit from a reduced VAT rate of 1.05% (e.g., the first 140 performances of a show).

Stripe Tax helps businesses comply with the VAT in effect in Guadeloupe, Guyana, and other overseas departments. Businesses in France can integrate tools directly into their site to comply with tax standards.

What are the VAT exemptions in the DOM-TOM?

As a general rule, VAT tax does not apply to the territories of Guyana and Mayotte. Also, Réunion, Mayotte, and Guyana constitute a special economic area, so trade between these territories is exempt from DOM-TOM VAT.

Further, deliveries of goods from mainland France to the DOM-TOM—including Guadeloupe, Martinique, Réunion, Mayotte, and Guyana—are also VAT-exempt. This exemption is based on the principle that the DOM-TOM are considered export territories, in accordance with no. 2 (1) of Article 294 of the General Tax Code.

How to invoice for VAT in the DOM-TOM?

Sales of goods or services between the DOM-TOM and third countries (i.e., countries located outside the EU) are generally VAT-exempt. However, certain transactions within the EU or between the DOM-TOM require special attention regarding DOM-TOM VAT exemptions; these exemptions must be mentioned on customer invoices.

For sales of services to individuals (B2C), the VAT of the service provider’s place of establishment applies. For transactions between businesses (B2B), the VAT depends on the place where the service is actually provided.

Mainland France to the DOM-TOM

Sales of goods

For any sales of goods from mainland France to the DOM-TOM, a specific VAT exemption must be mentioned on the invoice. It should appear like this: “VAT exemption in application of Article 294 of the General Tax Code.”

Sales of services

For any service provided to an individual (B2C), the applicable VAT rate is that used in mainland France, regardless of the provider’s place of establishment. For B2B services, the rate applicable in the DOM-TOM concerned must be followed.

The DOM-TOM to mainland France

Sales of goods

As a general rule, B2C and B2B sales of goods from the DOM-TOM to mainland France are VAT-exempt because they are considered exports. Therefore, there is no need to invoice for VAT to the mainland customer. It is advisable to mention on the invoice, however: “VAT exemption in application of Article 294 of the General Tax Code.”

Sales of services

For B2C service sales by a DOM-TOM company to an individual in mainland France, the VAT of the DOM is applicable on invoices. For B2B services, the VAT rate in mainland France must be applied.

The DOM-TOM to the EU

Sales of goods

For sales of goods to individuals (B2C) within the EU, “VAT exemption in application of Article 294 of the General Tax Code” must be mentioned on a VAT-free invoice. The VAT rate of the destination country applies, but it is usually the customer’s responsibility to pay the VAT upon import or with reverse charge, depending on the requirements of their country.

However, for sales to businesses (B2B), the reverse charge mechanism applies: the customer company is responsible for declaring and paying the VAT in its country, and the seller must mention “VAT exemption, Article 294 of the General Tax Code” on their invoice.

Sales of services

When a company provides B2C services, the VAT rate to be applied is that in effect in the department where the company is established

Between French overseas departments

Transactions made between the five DOM are generally VAT exempt. The main exception is trade between Guadeloupe and Martinique. These two islands represent a special pair for tax purposes, and, consequently, sales made between them are subject to VAT.

VAT in Guadeloupe and Martinique

Guadeloupe and Martinique represent a singular market in which VAT must be applied. Between these two islands, most transactions—whether B2B or B2C, goods or services—are subject to VAT. The VAT applied is either at the standard rate of 8.5% or at the reduced rate of 2.1%.

VAT in Réunion, French Guiana, and Mayotte

Réunion, French Guiana, and Mayotte are considered export territories, and therefore sales involving them are exempt from VAT. A company in Martinique, for example, would not be liable for VAT on sales to French Guiana—and vice versa. The invoices in these cases would also show that VAT had been excluded.

How do I pay VAT in the French overseas departments and territories?

French declarations (mainland France or the DOM-TOM)

To declare and pay VAT in France, whether in mainland France or the DOM-TOM, you need to use the government’s online portal. It's worth noting that the five overseas departments are all part of France, so any business—whether VAT-registered in Martinique or VAT-exempt in French Guiana—must use this tax portal.

Declarations for sales within the EU

Companies in the DOM-TOM are considered to be outside the EU for VAT purposes. They can therefore use the Import One Stop Shop (IOSS) for their distance selling to EU member states, provided they meet the following conditions:

• They sell goods online to private individuals in the EU for consignment
  
• The goods sold do not exceed a value of 150 euro
  
• The goods are stored in physical warehouses located in EU member states