Taxe sur la valeur Ajoutée (TVA – equivalent to VAT)
The TVA (Taxe sur la Valeur Ajoutée) is an expenditure tax imposed on consumers of goods and services. It is payable on almost all commercial goods and services, with few exceptions.
The main rates of the TVA are:
- 19.6% which is the main rate;
- A reduced rate of 5.5% for food, travel, some domestic personal services and most entertainment events, as well as repair and improvement work to residential dwellings;
- A rate of 2.1% for medical prescriptions, TV licences, sale of live animals, press publications and certain entertainment events.
Please note that a micro-entreprise (including an auto-entrepreneur) can neither claim nor charge TVA.
A small business can be exempted from being registered for TVA (and therefore will be able to reclaim TVA expenses) if its turnover does not exceed a certain amount. The TVA turnover threshold for 2011 is 32,600 € for a service based business and 81,500 € for commercial activities, bars and restaurants and those who let furnished accommodation.
In such a case (ie if a business is exempted from being registered for TVA) then all its invoices sent to its customers must state that TVA is not applicable.
TVA returns need to be made monthly or quarterly depending on the level of turnover. If the TVA paid is greater in any period than the TVA received then you may elect to either seek reimbursement or arrange a credit against the next declaration.
Business tax: Contribution Économique Territoriale (CET)
The Contribution Économique Territoriale (CET) is a local tax imposed by the departmental and regional councils on businesses to assist in the funding of local services and the Chambres de Commerce/Metiers.
The tax was introduced in January 2010, replacing the previously controversial form of business tax called the taxe professionelle.
Turnover tax (IFA – Impôt forfaitaire annuel)
Alter three years of existence, businesses liable to corporation tax are in addition liable to IFA, which in effect is a ‘flat rate’ corporation tax even if a loss is made. The amount payable depends on the turnover, including TVA, for the accounting period ended in the previous year. This tax is a deductible expense for corporation tax purposes.
Tax regarding business premises
Landlords can transfer to tenants the burden of every tax he should usually bear. It is advisable to ask for all tax receipts. The usual taxes are:
- Contribution représentative du droit de bail (tenancy tax)
- Contribution sur les revenus locatifs (tenancy income tax)
- Taxe sur les bureaux (tax on office rental)
- Impôts fonciers (land/council tax)
- Taxe de la ville (local tax)
There are a number of other employee taxes payable by companies who have employed employees.