VAT on cross-border services in France

For VAT purposes, what matters is not where the service is physically performed, but where it is deemed to be located for tax purposes. This territoriality rule determines which country taxes the transaction, which rate applies and who bears the VAT burden.

These principles are based on European Directive 2006/112/EC and are implemented in French law through Articles 259 et seq. of the French Tax Code, the Code général des impôts.

The central idea is straightforward: VAT depends primarily on the type of customer and, in certain cases, on the nature of the service itself.

 

The three key questions to ask in France

To analyse a service transaction correctly, companies should follow a three-step logic:

1. Is the customer a business customer, taxable for VAT purposes, or a private individual?
2. Does the service fall under the general rule or under a legal exception?
3. Who is liable for VAT and which reporting obligations apply?

 

The concept of a taxable person: a broad definition

A taxable person for VAT purposes is any natural or legal person carrying out an economic activity independently. This includes companies, traders, service providers and liberal professions.

Important: this concept is broader than the group of persons who actually collect VAT.

This means:

• A micro-business benefiting from a VAT exemption regime is still considered a taxable person for territoriality purposes.
• An entity identified for VAT purposes for certain intra-EU transactions is also treated as a taxable person.

Example:
A French company working for a German company with an intra-EU VAT number applies the B2B rules, even if that German company carries out VAT-exempt transactions in Germany.

 

General B2B rule: taxation in the customer’s country

The principle

When a service is supplied to a business customer, VAT is due in the country where that customer is established.

In practice:

• The French service provider does not charge French VAT.
• The customer accounts for VAT in its own country through the reverse-charge mechanism.

This principle applies both to customers located within the European Union and to customers outside the EU.

 

Practical consequences for French companies

When a French service provider invoices a foreign business customer, the invoice is issued without tax.

Depending on the situation, two French invoice mentions may apply:

Customer located in the EU

Invoice mention:

« Autoliquidation »

The intra-EU VAT identification numbers of both parties must also appear on the invoice.

Customer located outside the EU

Invoice mention:

« TVA non applicable – article 259-1 du CGI »

 

Practical examples

A French law firm invoices a legal service to a Swiss company.
→ Invoice excluding VAT; French VAT is not applicable.

A French agency carries out a campaign for a Spanish company.
→ Invoice excluding VAT with reverse charge; VAT is handled in Spain.

 

The reverse-charge mechanism within the EU

Within the European Union, the system is based on the principle of neutrality:

• The service provider invoices without VAT.
• The customer declares VAT in its own country.
• The same amount is deducted at the same time if the right to deduct exists.

This mechanism avoids the need for service providers to register for VAT in each individual country.

 

Reporting obligations of the service provider

Even when no VAT is charged, certain reporting obligations remain mandatory:

• Reporting the amount in the CA3 return as a non-taxable transaction
• Filing a European services declaration, DES, for EU customers

The DES is mandatory. Failure to file it may lead to penalties.

 

Intra-EU VAT number: a key element

Every European B2B invoice must include:

• the service provider’s VAT number
• the customer’s VAT number

It is strongly recommended to verify their validity through the European VIES database before issuing the invoice.

 

Person liable for VAT: principle and exception

As a general rule, VAT is paid by the person making the sale or supplying the service.

However, where services are supplied by a foreign provider to a French customer, the VAT liability is reversed:

The French customer declares and pays the VAT through the reverse-charge mechanism.

 

How reverse charge works in France

The customer company:

• declares output VAT on the purchase
• immediately deducts the same VAT if it is entitled to do so

Result: In most cases, the transaction is neutral and has no financial impact.

 

B2C cases: services supplied to private individuals

General principle

Where the customer is a private individual, VAT is generally due in the country of the service provider.

A French company will therefore generally charge French VAT, even if the customer is located abroad.

 

Important exceptions

Some services follow specific rules:

• Real estate: VAT at the location of the property
• Transport: rules depending on the routes
• Electronic services: VAT in the customer’s country within the EU once certain thresholds are exceeded
• Intangible services outside the EU: often outside the scope of French VAT

 

Derogating services: specific cases require attention

Some transactions follow neither the classic B2B rule nor the classic B2C rule, including:

• rental of means of transport
• real-estate-related activities
• restaurant services and on-site sales
• cultural or sporting events

In these cases, the physical location of the activity often prevails.

 

Practical examples

A French expert works on a building in Paris for a Luxembourg customer.
→ French VAT applies.

A seminar is organised in Spain for a Belgian company.
→ Spanish VAT applies.

 

Electronic services and OSS

Digital services supplied to European private individuals follow a specific rule:

• VAT is due in the consumer’s country.
• An annual threshold of €10,000 applies.
• The One-Stop Shop, OSS, can be used to simplify reporting.

 

Supplies of goods: avoid confusion

VAT rules for goods differ from VAT rules for services:

• Supply in France: French VAT
• Dispatch to the EU: possible exemption if the conditions are met
• Export outside the EU: exemption subject to customs evidence

The place of invoicing does not change this. Only the place of delivery matters.

 

Common mistakes to avoid

In practice, risks often arise from the following mistakes:

• incorrectly charging French VAT on a European B2B service
• forgetting the reverse-charge mention
• failing to verify the customer’s VAT number
• confusing the place of performance with the place of taxation
• neglecting reporting obligations such as CA3 and DES

 

FRADECO takeaway

For cross-border services, the physical place of performance alone does not determine the VAT treatment. The customer type, the nature of the service and the related reporting obligations are decisive.

A structured analysis helps companies avoid invoicing errors, reporting omissions and potential VAT corrections in France and abroad.