Covid-19 and the french VAT returns: Tax authorities propose new practical arrangements for businesses facing difficulties

Further to a letter dated 2 April 2020 sent to the French organization MEDEF (representing French businesses), the French administration published practical solutions for the filing of the next VAT returns for companies facing difficulties during the Covid-19 crisis on its website.

2 types of businesses may be concerned.

First, for businesses that may face critical issues in gathering all the relevant supporting documentation, the French administration specifies that they are allowed to apply the so-called “tolerance applicable during holidays”. This tolerance makes it possible to pay only an instalment of 80% of the sum due under the responsibility of the company. As a reminder, the acceptable margin of error is of 20% of VAT actually due.

Moreover, for the only businesses having suffered a decrease of their turnover due to Covid-19 crisis, it is exceptionally accepted, during the confinement period, to pay only a VAT installment as follows:

For the VAT return of March due in April:

  • By default, 80% of the amount declared for February or, if an instalment was yet paid for February, 80% of the amount declared for January
  • If the business activity has been stopped since mid-March (total closure) or largely decreasing (estimated to 50% or more): 50% of the amount declared for February or, if an instalment was yet paid for February, 50% of the amount declared in January

For the VAT return of April due in May:

  • Same arrangements as for the previous month if the confinement period is extended and would not allow an adjustment at that date

For the regularization VAT return:

  • Adjustment of VAT due for previous months where the instalment methodology has been used, based on accurate figures for those months, with deduction of instalments paid.

Practical implementation:

When paying the installment for a month in application of the specific measures, the amount of the installment must be mentioned on line 5B and an express mention must be included in the specific Box of the VAT return dedicated to comments to the tax authorities, must be made, completed with the following key words: “advance payment COVID-19 [reference to the month concerned] 2020: flat rate 80% or 50% of month X”;

In the regularization VAT return, the accurate figures for the previous months (subject to installment) will need to be summed-up with the figures of the current month, and the amount of instalment(s) yet paid will be deducted on line 2C .

Vanessa Irigoyen

Vanessa has joined Deloitte France in 2002 and she is the partner leading the French indirect Tax Practice. For more than 18 years, she advises multinational companies on their global […]

Odile Courjon

Odile Courjon, Partner, has developed a strong expertise in indirect tax issues (VAT, wage taxes, excise taxes, export control and customs) in France and overseas. She advises her clients in […]