VAT on services carried out in France

VAT implications for services carried out by our local French branch to a local French business B2B

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Hi All,

perhaps you could help with the VAT query below:

We have a local branch in France which regularly carries out jobs for local French businesses (we only do B2B).

As part of an agreement with one of our customers, we invoice all the work carried out for them in Europe from the UK.

In order to record the revenue locally our French branch is invoicing us but applying VAT at 20%. We were convinced they should be using the reverse charge mechanism? So no VAT in their invoices when generating the intercompany invoice.

The French claim that as the work has been carried out by them to a business in France that VAT should be charged in the IC invoice.

Can someone help? VAT or not VAT? And if the French have to include VAT on the IC invoice can we recover the amount in the UK?

Very confused?!?

Thanks,

V

Replies (12)

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By taxwizard
30th Nov 2016 18:21

Yes, I think since you have a permanent establishment in France and transaction is between 2 french companies. TVA should apply assuming you above the turnover threshold and need to register for TVA.

Thanks (1)
Replying to taxwizard:
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By victorsales
02nd Dec 2016 10:19

Thanks taxwizard,

but the French are not invoicing the local business, they are invoicing us in the UK with an IC invoice.
They should not be including French VAT in a France-UK IC transaction, right?
And if they do, how to we claim back the French VAT, we will be 20% out of pocket if we are not able to claim the French VAT back in the UK.

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Euan's picture
By Euan MacLennan
02nd Dec 2016 10:04

What type of services does your French branch provide to French customers? Or is it supplying goods to them?

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Replying to Euan MacLennan:
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By victorsales
02nd Dec 2016 10:19

There are no goods involved. We only provide consulting, technical advice, training and support for different industries (e.g hotel chains, airlines, etc).

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Euan's picture
By Euan MacLennan
02nd Dec 2016 14:24

I am no VAT expert (I wish one of the regulars would come along and give a definitive answer), but it seems to me that Taxwizard is correct.

A fixed establishment in France is the entity most closely associated with the supply of B2B services to a recipient in France. I am not sure why your French branch is raising an internal invoice, but I think that whatever invoice it does raise for the service is subject to French TVA, regardless of the location of the "customer" to whom the invoice is addressed.

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Portia profile image
By Portia Nina Levin
02nd Dec 2016 14:32

Is the French "branch" part of the same legal entity? or is it a different legal entity?

The information provided makes no sense.

So I am "very confused?!?" too.

Thanks (1)
Replying to Portia Nina Levin:
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By victorsales
02nd Dec 2016 15:01

Sorry for not being clear enough.

We have a French legal entity VAT registered in France BUT they do not invoice the final customer. We do, from the UK.

This is an agreement with the customer for all services provided by our company to them in different countries in Europe.

In order for our French company to record the revenue in their books they generate an IC invoice and send it to us in the UK.

The question still remains, if they input VAT in a French invoice sent to the UK can we claim it back in the UK? Can we apply the Reverse charge mechanism in France instead?

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Replying to victorsales:
Portia profile image
By Portia Nina Levin
02nd Dec 2016 15:19

Ah, so the "branch" is not a branch. It is a separate entity; a parent, subsidiary or sister company.

Yes. They should invoice you without TVA, and you then reverse charge.

Then you invoice the French customer and they reverse charge in France, and voila! the French Authorities momentarily get their TVA only to see it momentarily recovered by the end customer.

The place of supply of services seldom has anything to do with where the services are actually performed.

Has anybody noticed how these fundamental snippets of missing information can change the analysis significantly?

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Replying to Portia Nina Levin:
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By victorsales
05th Dec 2016 09:43

Hi Portia,

agreed! The Devil is in the detail!

I share your opinion, we should not see any VAT initially.

BUT in France they are adamant that this is the not the correct way to do it and that they must apply VAT at this is French to French supply, even though the invoice is coming from a different country.

Would you be so kind to send me some links with the correct legislation.

I found the below but was not able to come up with a definite conclusion:

http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/whe...

Thanks

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Replying to victorsales:
Portia profile image
By Portia Nina Levin
05th Dec 2016 11:00

In my experience, the French are incapable of being educated.

My only suggestion would be to offer them the following link in place of your own:
http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/whe...

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Replying to Portia Nina Levin:
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By victorsales
05th Dec 2016 12:03

Lol! Thank you!
Would you be so kind to help me identify under which category in the link you sent this case would fall in?

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Replying to victorsales:
Portia profile image
By Portia Nina Levin
05th Dec 2016 12:18

Under the heading "Les prestations de services" (supplies of services), you will find a section "Services d'enterprise à enterprise" (business to business services), which deals with B2B the general rule. Example 19 (as in the English version) is the example you want.

Thanks (1)