Summary
Summary
Explains the importance of choosing a tax accounting scheme and how the abolition of the simplified VAT regime in France from January 1, 2027, impacts taxable persons.
Background
In the jurisdictions that have in place a consumption tax, such as VAT, choosing(when possible) a tax accounting scheme is a very important step to be made for each taxable person. The accounting scheme has a direct impact on the cash flow, compliance requirements, and business decisions.
In France, the flexibility to choose one of the schemes is directly linked to turnover, the nature of the business, and the current regulatory framework. Finance Law for 2025 introduced a provision through Article 38 that mandates the abolition of the simplified regime from January 1, 2027.
This is a major change in the method of declaring and remitting owed tax for a broad spectrum of taxable persons.
Simplified Actual Tax Regime
What is a simplified tax regime under the French Tax Code?
The simplified tax regime is one of the VAT accounting schemes for declaring and paying taxes. It differs significantly from the standard reporting scheme, as it does not require submission of a monthly or quarterly return.
Simplified tax regime is one of the favourite schemes for taxable persons who have surpassed the VAT registration threshold, but don’t need to switch to the standard regime. Under this regime, the taxpayer reports VAT semi-annually, with semi-annual advance payments and annual return adjustments.
The scheme is based on the payment of two provisional installments in July and December. The advance payments are calculated based on the remitted tax from the previous year. The first part is 55% of the reference base, and the second December installment is 45%.
Impact of the Change
From January 1, 2027, the simplified tax regime will be replaced with a standard regime. This implies the reporting shift, from semi-annual advance payments, into monthly or quarterly return submission with accompanying fixed payments.
The compliance requirements will shift to more frequent preparation and submission of returns with accompanying payments. The non-compliance will result in fines and penalties. This shift calls for readjustment of the internal business processes. It requires adjustments to accounting and invoicing primarily.
Taxable persons who will be obliged to switch from the simplified tax regime to the standard actual regime, unquestionably, are going to “rewrite” their cash flow scheme, as the flexibility and implied “freedom” guaranteed with semi-annual advance payments will disappear.
Considering that taxable persons still have a bit more than six months, there is still enough time to prepare diligently for a mandatory change that will impact the business entities in scope from three principal angles: business, compliance, and administrative.
How to Stay Compliant
The France VAT regime for domestic and non-resident businesses could be quite complex.
We have successfully assisted many businesses in registering for VAT in France, whether they exceed the threshold or identify a significant economic presence in the country. Where we cannot manage your VAT requirements directly, we have a great network of local tax agents who will take care of this.
In addition to successfully managing your OSS registration, we offer full VAT compliance services in France. Such as:
- Assistance with Tax Reporting(preparation of returns, filing, and remittance)
- Tax Advisory and Ongoing Tax Management
- Correspondence with Tax Authorities
Takeaway
The abolishment of the simplified tax regime is a very important change, and it shouldn’t be forgotten or marginalized, which could objectively happen considering the “buzz” around the e-invoicing reform.
Author: Aleksandar Delic
This legislative change will unquestionably have a financial impact on a large group of taxable persons.
Indirect Tax Manager – E-commerce
Frequently Asked Questions
France will abolish the simplified VAT regime starting January 1, 2027. Businesses currently using this scheme will be required to transition to the standard VAT reporting regime.
The simplified VAT regime is a tax accounting scheme that allows businesses to declare VAT less frequently, using semi-annual advance payments and an annual adjustment instead of monthly or quarterly filings
Under the simplified regime, businesses make two advance VAT payments each year, in July and December, based on the previous year’s tax. These payments are followed by an annual VAT return to reconcile the total liability.
The simplified VAT regime will be officially abolished on January 1, 2027, following the provisions introduced by the Finance Law 2025.
The simplified regime will be replaced by the standard VAT regime, which requires more frequent reporting through monthly or quarterly VAT returns along with regular payments.
Businesses will need to adjust to more frequent VAT filings and payments, which will impact cash flow, increase administrative workload, and require updates to accounting and invoicing processes.
The reform will affect a broad range of taxable persons, including domestic and non-resident businesses currently using the simplified VAT regime.