The due date for value-added tax (VAT) varies depending on the type of activity a business conducts.

This article answers the most important questions on the subject, including what VAT on debit means, how it differs from VAT on receipt, and whether you should choose the option for VAT on debit. We also outline the advantages and disadvantages of the VAT on debit system.

What’s in this article?

• What is a due date?
  
• What is VAT on debit and how does it differ from VAT on receipt?
  
• What is the option for VAT on debit?
  
• What are the pros of VAT on debit?
  
• What are the cons of VAT on debit?
  
• How do I declare VAT on debit?
  

What is a due date?

To understand VAT on debit, we first need to understand the concept of VAT liability. The VAT due date is the date on which the tax authorities have the right to demand payment of the tax from the company liable. This date determines the period for which VAT must be declared and can be deducted by the company, and it varies depending on the type of activity. You can learn more about due dates in the French government article.

What is VAT on debit and how does it differ from VAT on receipt?

VAT on debit is applicable to businesses that sell goods (and not to those that provide services) by default. VAT becomes payable when the debit is posted to the customer’s account, which typically coincides with the date the invoice is issued.

For services, the due date corresponds instead to the date the payment or a deposit is received. Payment can be made by bank transfer, check, or cash. In general, service providers (including those in the real estate sector) are subject to VAT on receipt.

What is the option for VAT on debit?

A mixed-activity business that sells both goods and services can choose to use VAT on debit. The company can submit a written request to its local corporate tax office (service des impôts des entreprises, or SIE).

This option becomes effective on the first day of the month following the submission of the application. Although it’s not mandatory, it’s highly recommended that companies include the phrase “payment of VAT on debit” on the invoice of any business that has opted for this system. The company may also revoke the option in writing, which will be implemented on the first day of the month following the request.

What are the pros of VAT on debit?

The VAT on debit option simplifies accounting for mixed-activity companies. Instead of having two separate due dates, the VAT on debit system allows the company to consolidate the VAT due on both the sale of goods and the provision of services. As a result, the VAT on both transactions is due on the same date: when the debit is posted to the customer’s account. This system significantly increases the efficiency of the company’s accounting and administrative processes.

You can streamline your tax compliance with Stripe Tax, an automated tool that simplifies the calculation, preparation, and submission of your VAT returns. Stripe also provides detailed reports on your transactions and income for the year.

What are the cons of VAT on debit?

One major drawback of VAT on debit is that the system can create a cash flow gap for the business if the customer does not pay the VAT immediately. As a result, the business might owe the tax authorities VAT it has not yet received. This could cause cash flow problems if not managed properly.

How do I declare VAT on debit?

All businesses subject to VAT are required to declare VAT on the invoices issued during the relevant reference period. Only businesses under the basic VAT exemption system are excluded from this requirement. The frequency of the declaration depends on the VAT regime to which the company is subject: it can be monthly or quarterly (under the normal VAT regime) or annually (under the simplified VAT regime).

Monthly and quarterly declarations are made using cerfa form no. 3310-CA3-SD or cerfa CA3. For businesses under the simplified tax regime, the annual VAT declaration is made by completing the online cerfa form no. 3517-S-SD.