What VAT regime is my French business under?

French VAT regimes

The VAT refers to a tax that almost all French businesses have to pay, that depends on the price and volume sold of your products (you find the VAT rates in France here). However, depending on your turnover, you might not have to pay it at all, and even if you do, how and when you pay it might vary. This is because there are actually 3 different VAT regimes.

The “Franchise” Regime:

If you’re under this regime, you don’t have to pay the VAT at all. This is the case if your annual turnover is less than:

  • 82 800 € for your sales
  • 33 200 € for your services
  • 42 900 € for certain regulated activities such as lawyers, or singer-songwriters.

You can still choose to pay the VAT if you want though. Why would you ever want to do that? If you pay the VAT, you’ll be able to claim the VAT back on your future investments. As such, if you’re planning to invest a lot, it might be worth considering.

The “Simplified” Regime:

You can choose this option if your annual turnover is between:

  • 82 800 € and 789 000 € for your sales
  • 33 200 € and 238 000 € for your services

Here, you’ll only have to pay the VAT twice: in July and in December. It works as follows:
At the end of each year, you have to file an annual VAT report, where you indicate how much VAT you owed to the Tax Authorities that year.
Then, the next year, in July, you pay 55% of the VAT you owed the government in the previous year, and in December you pay another 40%.

As such, this spares you from having to do complex math every month to determine exactly how much you have to pay, and you already know exactly how much you owe in advance.
Don’t’ worry though, if you find that the VAT you end up paying is largely superior to what you would have to pay if you paid the VAT monthly, it’s possible to ask to change it.

The “real normal” Regime:

You can choose this option if your annual turnover is superior to:

  • 789 000 € for your sales
  • 238 000 € for your services

Here, everything works as you’d expect: you pay the VAT monthly based on your sales that month.