Most businesses in France and the European Union are required to declare and pay value-added tax (VAT) on most sales of goods and services. Only businesses that are not subject to VAT—i.e., those that are covered by the VAT-exempt scheme—are completely exempt. This article examines the characteristics of this special regime: the article of the French General Tax Code that establishes it, the businesses that can benefit from it, and the thresholds set by the code.
What’s in this article?
- What is Article 293 B of the French General Tax Code and who does it apply to?
- What conditions must be met to benefit from the VAT-exempt scheme?
- Which transactions are excluded from the VAT exemption?
- How do you create an invoice in accordance with Article 293 B of the French General Tax Code?
- What should you do if the threshold is exceeded?
What is Article 293 B of the French General Tax Code and who does it apply to?
Article 293 B of the French General Tax Code is the French legislation that exempts businesses covered by the VAT-exempt scheme from paying and declaring VAT. As taxable entities exempt from value-added tax (VAT), these businesses cannot deduct or recover VAT on their business purchases. For more information on deductible VAT, see our article on the subject.
Most microbusinesses and self-employed people are exempt from VAT because their turnover does not exceed a certain threshold.
What conditions must be met to benefit from the VAT-exempt scheme?
In order to benefit from the VAT-exempt scheme and full tax exemption, businesses must meet certain income thresholds. These thresholds vary according to the type of business carried out and the calendar year concerned:
- Excluding lawyers, businesses operating liberal activities or selling services are exempt from VAT if their gross turnover for the previous year does not exceed €36,800 and €39,100 for the current year.
- For businesses operating commercial or housing activities, their turnover must not exceed €91,900 for the previous year or €101,000 for the current year.
- Authors and performers are covered by the VAT-exempt scheme if their supplies of works and transfers of rights do not exceed €47,700 for the previous year and €58,600 for the current year. For their other professional activities, the thresholds are a turnover of €19,600 for the previous year and €23,700 for the current year.
- Finally, lawyers are subject to the same thresholds as artists—€47,700 for the previous year or €58,600 for the current year if they are regulated activities. In the case of nonregulated activities, the threshold is €19,600 for the previous year and €23,700 for the current year.
Which transactions are excluded from the VAT exemption?
The VAT-exempt scheme provided for in Article 293 B of the French General Tax Code is not applicable to businesses operating the following activities:
- VAT-eligible property activities
- Agricultural operations that are covered by the simplified tax assessment scheme
- Intracommunity deliveries of new means of transport
- Other activities optionally subject to VAT
How do you create an invoice in accordance with Article 293 B of the French General Tax Code?
Under Article 293 B of the French General Tax Code, the wording “TVA non applicable, art. 293 B du CGI” (“VAT not applicable, Art. 293 B of the French Tax Code”) must be stated on all invoices from a business that is not subject to VAT. You can access the legislation by exploring the link above. This indicates to the customer that the professional is invoicing for their sales exclusive of tax and that VAT will not be deducted or recovered at a later date. Please note that in the event of an audit, any invoice that does not contain this mandatory wording may be subject to a tax adjustment.
What should you do if the threshold is exceeded?
From the first day of the month in which the VAT threshold is exceeded, the business becomes liable for VAT. It must then obtain its intracommunity VAT number from the government tax office (SIE in France) and charge VAT on the sale of its goods or services. If VAT is forgotten or not charged on transactions once this threshold has been exceeded, the business will have to issue corrective invoices for the sales in question in order to make them liable to VAT. In other words, it will have to correct all invoices issued during the month in which the threshold was exceeded.
Please note that once a business is subject to VAT, it may benefit from VAT credits and deductions, if applicable.
To learn how to prepare a VAT invoice in accordance with the tax office’s rules, see our articles on the required items for a standard invoice and a self-employed invoice. You can also find out how to calculate VAT in our article on the subject.
Alternatively, you can automate your invoicing process from start to finish with an advanced tool such as Stripe Tax. This integrated solution speeds up the personalization of your invoices and monitors your tax thresholds—all while streamlining your accounting and invoice payments. Stripe invoices are typically paid in under three days. To get started with Stripe or to learn more, contact one of our experts.