New requirement for purchases in excess of 863,000 €

Customs Obligations

New requirement for purchases in excess of 863,000 €

To combat VAT fraud, which accounts for several billion € in lost earnings for the State, the National Assembly adopted an amendment requiring companies making purchases for an amount exceeding a given ceiling to declare these immediately to the tax department. This practice, deemed too difficult to implement by the current government, was nevertheless retained at the second reading.

VAT fraud is a financial abyss for the State
VAT fraud costs the State some 14 billion euros according to Bercy. To combat this scourge, the Ministry is putting new measures in place to counter these techniques now familiar to the tax authorities. The 3 most common ways to commit VAT fraud are:

The cash register: This fraud consists of deleting some of the transactions made by merchants from their cash register. Illegal software allows this to be done in full confidentiality. However, from 1st January 2018, the new finance act requires all merchants to install certified software to eradicate this very widespread practice.
False invoices: Generating false invoices for fictitious service providers. This practice is very common in the construction industry.
VAT carousel mechanism: This is the most costly method and difficult to identify. Temporary fraudulent businesses use the VAT reverse charge mechanism on intra-community transactions without paying VAT and then resell to French companies with VAT, without remitting it to the State.

 

Compulsory online declaration for purchases exceeding 863,000 €

To eradicate VAT fraud, the amendment currently under discussion in the Assembly would require companies making purchases in excess of 863,000 € to declare these online within 24 hours on the tax department website. For all purchases in excess of this amount or for any cumulative purchases over 3 months from the same seller exceeding this threshold, the company must declare these online or face a fine of 2% of the undeclared amount. However, it is stipulated that the fine will not be implemented if the supplier is not in dispute with the tax authorities and regularly remits VAT to the public purse.

This declaration does not include the service provisions of the VAT package (reverse charge mechanism, VAT payable by the buyer), or deliveries not subject to VAT.

Notwithstanding government concerns about implementation, this amendment was adopted by the National Assembly. It still needs to obtain final approval, however, at its last reading on Tuesday 27th December 2016.

Consult the full draft Finance Bill 2017 including article 51(b)

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