In France, all companies are liable to pay value-added tax (VAT). So, how can you make sure you apply the right VAT rate? Why are there different rates for VAT in France? This article will look at the four value-added tax rates in France, and how this tax is applied to products and services sold.
What’s in this article?
- VAT in France
- The different VAT rates in France
- VAT on food products
- VAT on luxury goods
- VAT on services
- VAT on alcohol
- VAT-exempt transactions
VAT in France
Value-added tax (VAT) is a consumption tax consumers pay to the government when they purchase goods or services from a company. As for the company, it plays an intermediary role: it has an obligation to collect VAT for the government by charging value-added tax directly to its customers at the time of purchase.
The different VAT rates in France
In France, the VAT rates vary according to the type of product or service proposed. There are currently four VAT rates applicable in France:
- The normal rate (or full rate) fixed at 20%
- The intermediate rate at 10%
- The reduced rate at 5.5%
- The super-reduced rate (or special rate) at 2.1%
Normal rate
The normal rate of 20% applies to most sales of goods and services for which there is no special rate specified. Alcohol and luxury goods are subject to this rate.
Intermediate rate
The intermediate rate is 10%, and it’s mainly applied to prepared food products, catering and restaurants, nonprocessed agricultural products, and some housing renovation works.
Some other products and services that are charged at the intermediate rate of 10% include: camping services; firewood; admissions to museums; zoos; fairs; trade shows; fairground rides; historic monuments; academic support; passenger transport; and waste treatment.
Reduced rate
Nonprepared food products, along with gas, electricity and renewable energies are subject to the reduced rate of 5.5%. This rate also covers all feminine hygiene protection products; equipment and services for disabled individuals; essential products; and emergency or social housing.
Some other products and services it applies to include: books; school canteen meals; some live entertainment and cinema showings; some imports and deliveries of artwork; efforts to improve the quality of energy in housing; and the purchase of certain property.
Super-reduced rate
The super-reduced rate of 2.1% is principally reserved for medicinal products and blood products, which are eligible for reimbursement by social security. It also covers the sale of animals for butchery and processed meat, newspapers and written press.
It should be noted that food products appear twice as they cover multiple specific cases. So, how can you identify the right VAT rate for food products?
VAT on food products
The rate for VAT on food products depends on the type of product sold, and it varies according to the anticipated consumption period.
Immediate consumption
Food products cooked and intended for immediate consumption are subject to the intermediate VAT rate of 10%. This is the case for all food prepared in restaurants, cafés, and bars. Fast food is also charged at this rate, along with meals prepared in bakeries, supermarkets, and shopping centers. The same rate applies to food delivered or served by a caterer at events.
Postponed consumption
For food products intended for postponed consumption, the VAT rate is fixed at 5.5%. These food products are stored in airtight containers and have an expiration date. They include food products sold in supermarkets and retail stores.
Some products served in restaurants, such as chips, nonalcoholic canned drinks, bottled water, and packaged fruit are charged at the reduced VAT rate of 5.5%, as their packaging allows for them to be consumed later. However, products intended to be consumed on-site, such as a glass of water or pressed orange juice, are subject to the 10% VAT rate.
VAT on luxury goods
All luxury goods are charged at the normal rate of 20%. This includes jewelry, precious stones, caviar, tobacco, and cocoa-based products.
VAT on services
Most services—such as haircuts and hair treatments, housework, childcare, medical treatments, and travel agencies—are subject to the normal rate of 20%. However, some services benefit from a reduced rate of 5.5%: waste treatment and passenger transport.
VAT on alcohol
The VAT rate on alcohol is 20% for alcoholic drinks with an alcohol strength of 1.2% or higher. For beer, this VAT rate is applied from strengths of 0.5%.
VAT-exempt transactions
It should be noted that intracommunity deliveries, exports, teaching activities, and some banking, financial, and medical transactions are VAT-exempt.