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France: Changes in VAT Groups

Many changes are about to happen in the VAT area from the New Year. In France, January 2023 will mark the introduction of the full VAT group simplification. This means that VAT groups will be treated as single taxable persons — with more complexity than in the prior VAT groups regime.

The previous French VAT groups regime was considered to be administrative and declarative, while the updated VAT groups will have a more practical use. The administrative simplification allowed the formation of a VAT group that could not be treated as a single taxable person, and intra-group supplies were still reported for VAT. Each member of the group was obligated to fill out separate VAT returns and to have distinct VAT numbers. However, the group could consolidate all VAT due into one payment— once the head of the group submits a unified VAT return. The consolidated payment rule granted some cashflow benefits to the members of the group and joint liability in case of debts.

Based on the updated VAT groups rules, intra-group transactions are now disregarded for VAT purposes, even though the records of these transactions still have to be archived. At the same time, VAT group members won’t be able to file separate VAT returns, only the consolidated ones. The members remain jointly liable for VAT debts and penalties of the group.

The companies that wanted to join a VAT group in 2023 had to submit an application before 31 October 2022. The same deadline for each following year will apply, with registration deadlines at the end of October each year.

Here are the main rules governing the new VAT groups regime in France:

Origin and grouping. Only French-based businesses can become members of a VAT group. The grouping is optional, and companies can choose to remain separate entities even when meeting the requirements of a VAT group.

Time period. The minimum duration of a VAT group is three years. Once the first three years pass, entities can decide to leave a VAT group.

Reporting. All invoices issued by VAT group members have to include specific wording to note that the business is part of a VAT group, together with individual and group VAT numbers.

Do you have any questions about VAT compliance in France? Our team is here to help.

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