Case study: Recovery of VAT in France incurred by a Swiss company
Many companies established outside the European Union seek our services to recover VAT paid in France on business expenses, such as transport, exhibitions, importation etc.
As an illustration of this topic, we shall consider the case of a Swiss company which has incurred expenses in France and which submits a VAT refund request to the French tax authority following its participation in a business fair.
What is VAT?
The Value-Added Tax (VAT) was created in the 1950s and relates to the value of the item purchased or imported; the rate may vary from year to year. The VAT rate in France in 2017 is 20%, but there may be some devaluations on certain goods and services.
First of all, a reminder of the three conditions of eligibility: it is required:
• to be a company
• to be able to prove its capacity as a “taxpayer” in its country of origin.
• that the company’s country of origin has signed a reciprocity agreement on VAT refunds.
Case study: recovery of VAT in France by a Swiss company
A Swiss manufacturing company, specialising in manufacturing chocolates and marketing its products throughout the world, takes part in a well-known trade fair for chocolatiers in the city of Lyon in France. Its participation incurs expenses related to the fair and to travel. Below are several examples of the expenses that the company may have at the location and also indirect expenses which include expenses which are not directly related to the company’s presence at the fair:
• Travel expenses
• Accommodation expenses
• Meals and beverages
The Swiss chocolate manufacturing company must ensure that its purchase invoices comply with the applicable French rules.
Furthermore, some expenses are not deductible; it is therefore important to review each type of expense to understand whether it is possible to recover the VAT paid.
Below is the breakdown of the Swiss company’s expenses incurred in France:
Direct costs: If the invoice includes a package (exhibition space, electricity, furniture, etc.), this expense is invoiced by the organiser of the fair exclusive of tax. However, if the organiser simply leases the bare exhibition space, the invoice will include VAT (inclusive of tax). Consequently, it is important make the distinction between the two. In our example, the Swiss company chooses the second option: rental of the bare exhibition space.
Indirect costs: After identifying the expenses, we now need to determine whether they are deductible. Listed below are the deductible expenses of our example:
The invoice of the organiser for the stand rental: 100% deductible.
VAT on hotel accommodation is not recoverable, unlike meal and beverage costs. It is therefore possible to recover VAT on breakfasts but not VAT on hotel accommodation.
Diesel costs: if the car is a diesel company vehicle 80% of VAT is deductible.
Meal and beverage costs are 100% deductible.
Checking the amount of recoverable VAT
|Type of expense||Amount (excl. tax)||VAT rate||Amount of VAT paid||Deductible rate||Recoverable VAT amount|
|Stand||8 000€||20%||2 000€||100%||2 000€|
|Meals and beverages||360€||10%||40€||100%||40€|
|Total||2 193€||2 096€|
This amount can be fully recovered provided that the refund procedure is correctly completed.
Important note: it is essential to remember that refund requests are only admissible if they relate to a minimum sum of 400 euros for quarterly requests and 50 euros for annual requests.
What administrative formalities must a Swiss company complete to recover its French VAT?
The Swiss company must submit its foreign VAT refund request during the month following the calendar quarter-end or during the month of January, but at the latest by 30th June of the year n+1.
Its request must be submitted using form no. 3559-SD of the Directorate General of Public Finances. Its expenses breakdown must be written in French and the amounts of the refund requested must be stated in euros.
This request can also be submitted by email to the VAT Refund Department at the following address: 10 rue du Centre, TSA 60015, 93465 - NOISY-LE-GRAND CEDEX
It will take about 4 months to process the request and generally about 6 to 8 months to complete the investigation. Payment is made within 10 days following approval of the request. The reply will be sent on paper or by email.
Appointing a tax representative in France to recover your French VAT
Companies situated outside the European Union are required to appoint a tax representative in France to submit a VAT refund request. Article 271-V-d of the General Tax Code and 242-0 Z (g) of annex II stipulates that taxpayers established outside the European Union are required to obtain accreditation from the tax department for a representative established in France to complete the formalities and obligations incumbent upon them, notably those stipulated in article 242-0 Z (f). In addition, the tax representative must ensure that the foreign company is not taxable in France. This means verifying that the company is neither required to invoice French VAT on its sales, nor to have a VAT number in France.
The Swiss chocolate manufacturing company therefore appointed ASD as its representative in order to comply with this obligation and submit its VAT refund request.
ASD group offers you assistance in handling these procedures and can act as your representative, managing the whole recovery process. For further information on our VAT recovery service, contact us via our contact form.
This example also applies to any company which is not established in the European Union (American, Canadian, etc.). Furthermore, ASD offers the VAT recovery service in every European Union member State.