France plans to introduce the concept of a VAT Group from 1 January 2023. This provides the option for related companies to form a single VAT person, with just 1 VAT registration, and eliminate the cash flow drain of VAT payments on intra-group invoices.
Limited VAT group in France today
The current French VAT Group arrangements, introduced in 2012, only permits netting off of debit or credit amounts owed between nominated related companies. Each company must still file its own VAT return, but does not have to pay VAT on intra-group invoices. Only where the lead company, responsible for the consolidated reporting, holds at least 50% of the other members’ share capital will it be granted. Learn more about French VAT in our country guide.
January 2023 full VAT group
The 2021 French Budget is introducing full VAT groups on 1 January 2022, for full operation from 1 January 2023. This will permit linked businesses to form a single taxable person for VAT. This means no VAT is due on invoices between members of the VAT group. Companies must apply initially for a 3-year minimum licence for a group, during which time no VAT returns are due from the individual members – a leading member will take responsibility for submitting a consolidated return. To qualify to join a group, businesses must be incorporated, but linked by shareholding, economics of financially or by control. Only French resident businesses may join a VAT group. The group would share a single number, but all remain jointly and severally liable. For input VAT recovery, each member would be considered a separate business unit and the attribution method would apply (article 271 of the French tax code). Related provisions in the French tax code, notably regarding the VAT pro-rata calculation, would have to be amended by a decree of the French Supreme Court.