The French VAT-free purchasing quota: a guide for exporting companies

‍What is the VAT exemption on purchases?

The VAT exemption on purchases is a regime that allows businesses not to pay VAT on certain purchases when they are intended for VAT-free transactions, in particular:

• Exports outside the EU;
• Exempt intra-community deliveries;
• Distance sales of goods to another Member State (under certain conditions);
• Deliveries of gas, electricity, heat or cold located outside France;
• Services relating to these goods (transport, assembly, installation).

In practice, the company must provide a certificate of purchases free of VAT to its suppliers, which allows them not to charge VAT.

What is the VAT-free purchase quota?

The VAT-free purchase quota corresponds to a ceiling of purchases that the company can make without VAT. This ceiling is determined according to the amount of exempt deliveries made during the previous year.

Quota calculation:

The company can choose between:

• The amount of transactions carried out during the previous calendar year;
• The amount of transactions carried out in the last 12 months (if this amount is higher).

If the company exceeds this quota, it must either:

1. Request specific authorization from the tax authorities (30-day response period).
2. Pay VAT on additional purchases and recover it later via the deduction mechanism.

Can newly exporting companies benefit from the system?

New businesses or those starting to make exempt deliveries can benefit from a quota of duty-free purchases as early as their first year of international activity.

In this case, the tax authority grants a quota based on the real needs of the company, taking into account commercial contracts signed with foreign countries.

Example: A company that is starting to export and has a firm international sales contract can justify its quota request to the tax services.

Suretyship: an obligation in some cases

A bond may be required by the tax authorities in several situations:

• New business or first franchise operations;
• Exceeding the quota granted;
• Doubtful solvency of the company.

The deposit, which can be personal or real (excluding a conventional mortgage), is in principle equal to the VAT that should have been paid. However, a bond exemption may be granted if the company demonstrates an irreproachable fiscal morality.

The formalities to be completed to benefit from the duty-free purchasing quota

To benefit from the system, the company must complete several administrative formalities:

1. Obtaining the quota

• Make an application to the Business Tax Service (SIE).
• Provide the necessary supporting documents (foreign sales contracts, financial statements, etc.).
• Obtain the certificate of purchases free of VAT, valid for one year.

2. Use of the certificate of purchases free of VAT

• Give the certificate to the suppliers before delivery.
• Respect the ceiling of the quota granted.
• If the quota is exceeded, request an extension of the quota before making new purchases.

3. Visa renewal and exemption

Some companies benefit from a visa exemption to avoid the obligation to submit their certificates to taxes. This exemption is granted to businesses:

• having never had a tax breach;
• already established on the international market.

New businesses can also request an exemption, provided they can prove that the visa is causing them significant difficulties (large number of suppliers, recurring orders, etc.).

‍What are the sanctions in case of non-compliance with the quota?

If a company exceeds its quota without authorization, it is exposed to a VAT reminder and tax sanctions. However, the tax authorities consider that the mere fact of having declared an incorrect amount does not, by itself, justify an adjustment. The latter takes place if significant discrepancies are found between the quota granted and the purchases actually made.

Conclusion: an advantageous device under strict conditions

The VAT-free purchase quota is a valuable tool for exporting companies, allowing them to optimize their cash flow by avoiding the advance of VAT. However, this regime imposes strict obligations and requires rigorous management of certificates and ceilings granted.

Do you want to set up this system or check your eligibility? Our VAT experts support you in your procedures and help you secure your tax compliance.

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Contact Cyplom Avocats now for tailor-made support!

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