Box E3 of the French VAT return: Important points to keep in mind

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General presentation of the E3 box

Box E3 is used to report The amount excluding VAT Of distance sales of goods which meet the following conditions:

1. The goods are shipped from France to another member state of the European Union (EU).
2. The goods are sold to persons who are not subject to VAT (individuals).
3. Transactions are taxable in the Member State of destination.

These three criteria are essential to understand in which situations sales must be declared in box E3 of the VAT return.

Details of the transactions concerned

Definition of distance selling

One distance selling corresponds to the sale of a physical good shipped from one EU Member State to another EU Member State, for the benefit of an individual.

Example: A French company sells and ships books from France to an individual residing in Spain. If this sale is subject to Spanish VAT, it must be reported in box E3.

Conditions of application

• Only goods are concerned : Services (videos, ebooks, digital subscriptions) are not affected by this box.
• Domestic sales are not affected : A sale of goods between a seller and an individual located in France is a sale national, subject to French VAT and declared in box A1.
• Sales to countries outside the EU are not affected. : A sale to an individual in Switzerland or the United Kingdom does not fall under box E3.
• Customers must be non-VAT payers : A sale to a company with an intra-community VAT number should not steps be declared in box E3, but in box F2 (exempt intra-Community delivery).

The concept of a €10,000 threshold

A fundamental element to take into account in the declaration of box E3 is The €10,000 threshold.

• Below this threshold : A French company making B2C sales in the EU can continue to apply French VAT. These sales are then declared in Box A1.
• Beyond this threshold : The company must collect VAT from the Member State of destination and apply it as soon as the first sale exceeds this threshold.

Example: A company selling clothing online makes €9,500 in sales to individuals in the EU. It applies French VAT. If it exceeds €10,000, it must apply the VAT of the destination countries (Spanish VAT for Spanish customers, German VAT for German customers, etc.).

We recommend to anticipate the threshold being exceeded by applying the VAT of the destination country from the start to avoid having to follow the threshold all the time and to limit the risk of error.

Note: This threshold is not applicable in case of shipment from a State other than France. The threshold includes the provision of electronic services.

Common mistakes and tax risks

Many businesses exceed the €10,000 threshold and continue to apply French VAT to their B2C sales in the EU. This exposes society to a tax adjustment by foreign authorities, who are waiting to collect their local VAT.

In this case, the company will have to ask the French tax authorities for the refund of VAT collected incorrectly, then remit the VAT due to the countries concerned, which can be long and complex.

The expert's point of view

Declaration of distance sales

1. Report in case E3 : Indicate the tax-free amount of distance sales taxable in another EU member state.
2. OSS statement : In parallel, these operations must be reported quarterly In the OSS statement (One Stop Shop), which makes it possible to centralize the payment of VAT collected in several Member States.
3. No cash flow impact on CA3 : Unlike the other boxes in the VAT return, the transfer to box E3 is purely declarative and does not involve any payment on the CA3 declaration.

The OSS: An essential statement

La OSS statement (One Stop Shop) is a device that allows businesses to declare and pay VAT collected in all Member States via a single declaration in France, every quarter.

How does the OSS work?

• The company collects VAT according to the rates applicable in the Member States of destination.
• She declares and pays this VAT via the impots.gouv.fr platform.
• The French tax administration then redistributes the amounts collected to the Member States concerned.

This procedure simplifies VAT management for businesses making B2C sales in several Member States.

Important points to keep in mind

• Verify the nature of sales : Only sales Of goods To individuals in the EU must be declared in box E3.
• Do not apply French VAT if the threshold of €10,000 is exceeded : The erroneous application of French VAT on taxable sales in another Member State exposes the company to the risk of tax adjustment.
• Anticipate the threshold being exceeded : Set up the VAT rates of the destination Member States from the start to avoid tracking errors.
• Report correctly in the OSS : The report in box E3 is a reporting obligation, but the actual payment of VAT is made via the OSS.

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