Managing Value Added Tax (VAT) can be complex for groups of companies. The regime for consolidating the payment of VAT, established by article 1693 ter of the French Tax Code (FTC), offers a solution to centralize the payment of VAT within a group. What are the benefits of this diet? What businesses can benefit from it? What are the application procedures? Decryption.
What is VAT payment consolidation?
The VAT consolidation regime allows a group of companies to designate an entity, called group liable, responsible for centralizing the payment of VAT due by all members of the group. Each company continues to determine its collected and deductible VAT individually, but the payment is made in a consolidated manner by the group's taxable person.
What are the benefits of this diet?
The adoption of the consolidation of VAT payments has several advantages:
- Administrative simplification: a single VAT return is filed for the entire group, thus reducing the number of declarative transactions.
- Optimization of cash flow: VAT credits from one company can offset VAT debts from another company, thus improving the group's cash management.
- Reduction of internal operations: transactions between group members are not subject to VAT, simplifying internal financial flows.
What businesses can benefit from it?
The regime for consolidating the payment of VAT is reserved for groups meeting the following conditions:
- VAT liability: all members of the group must be subject to VAT and subject to the normal real taxation regime.
- Management by the Department of Large Enterprises (DGE in French): companies must report to the DGE, generally those whose turnover or total gross assets are greater than or equal to 400 million euros.
- Synchronization of accounting years: Group members must have open and closed financial years on the same dates.
- Capital link: the group's taxable person must hold, directly or indirectly, more than half of the capital or voting rights of the other members, continuously over the period covered by the option.
How to set up this regime?
To benefit from the consolidation of VAT payments, the group must follow the following steps:
- Prior option: the group's taxable person must exercise the option for the regime before the start date of the financial year in question.
- Members' agreement: each member company must agree for the taxpayer to pay VAT on its behalf.
- Transmission of certificates: the taxpayer must send the tax authorities the list of members of the group as well as the corresponding certificates of agreement.
What are the reporting obligations?
Under this regime:
- Individual declarations: each member continues to file a monthly income statement detailing the total amount of transactions carried out and taxable transactions.
- Summary statement: the group's taxpayer files a consolidated statement summarizing all the VAT due or the members' VAT credits.
- Single payment: the taxpayer makes a single payment corresponding to the net VAT balance due by the group.
What are the responsibilities of members?
Although the group's debtor centralizes the payment of VAT, each member remains jointly and severally responsible for the payment of the tax and any penalties, up to the amount that they would have had to pay in the absence of consolidation.
What is the difference between the payment consolidation regime and the VAT Group?
The VAT payment consolidation regime and the VAT Group regime are two distinct mechanisms aimed at simplifying the management of Value Added Tax within groups of companies. Here are the main differences between these two regimes:
- VAT consolidation regime: Established in 2012, this regime allows a parent company of a group to pay the VAT due by all members of the group. Each entity continues to file its own VAT returns, but payment is centralized at the level of the parent company, which becomes the sole party liable for the group. Intra-group transactions remain subject to VAT, and each company maintains its status as an independent taxable person.
- VAT Group Regime: Entered into force on January 1, 2023, this regime allows entities closely linked financially, economically and organizationally to form a single VAT taxable person. Transactions within the group are no longer subject to VAT, which simplifies reporting obligations and reduces the number of transactions to be reported. A single VAT return is made for the entire group, and a unique identification number is assigned. This regime is available to all companies that meet the required conditions.
In summary, while the VAT consolidation regime only centralizes the payment of tax at the level of the parent company without changing the status of member entities, the VAT Group regime goes much further by considering all entities as a single taxable person, thus eliminating VAT on intragroup transactions and further simplifying tax obligations.
Conclusion: an advantageous device under certain conditions
The regime for consolidating VAT payments offers large groups a significant simplification of their tax obligations and an optimization of their cash flow. However, it is essential to comply with the eligibility conditions and reporting obligations in order to fully benefit from this system.
Are you considering implementing this regime in your group? The lawyers at Cyplom Avocats are at your disposal to assist you in this process and ensure your tax compliance.
Contact us now for personalized support!
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