What VAT should be applied to delivery costs? (France)

In principle, the invoicing of postage or transport costs is an autonomous operation that must follow its own regime when the costs are invoiced independently.

This is particularly the case when a company requests a carrier to move its goods from one warehouse to another.

In the situation in which a French carrier carries out a transport operation on behalf of a French company from Marseille to Bordeaux, the carrier must issue an invoice with VAT at the rate of 20%.

The carrier must therefore correctly configure its billing and accounting system so that delivery costs follow their own regime according to the applicable territoriality rules.

From a financial point of view, if a French company decides to move goods between two warehouses belonging to it, the VAT treatment is as follows:

• Transport service:
  • Amount excluding VAT: 20€
  • VAT on transport services: 4€

Exceptions: the transport costs invoiced by the seller to his customer are an element of the selling price

Integration into the price of goods

When transport costs are invoiced in conjunction with goods that are sold by a company, the transport costs follow the VAT rate applicable to the goods that are marketed.

In fact, it is intended that the transport costs that are invoiced by the seller to his customer constitute a component of the selling price of the goods (2° of I of article 267 of the CGI).

If a French company sells food products subject to the 5.5% VAT rate to its individual French customers and the sale includes delivery, then that company has every interest in including transport costs in the sales price so that the 5.5% VAT rate also applies to transport.

Indeed, in the case of a natural person consumer for whom VAT is a cost, the fact that transport costs are included in the tax base of the goods sold and are therefore subject to the VAT rate of 5.5% constitutes a significant advantage.

This rule also applies when the transport costs are related to an exempt transaction (exempt goods, intra-community delivery, export, etc.).

In practice, these are so-called “free shipping” sales. The cost of transport is integrated into the price of goods in the same way as packaging or other components.

This presumption applies whenever the seller carries out the transport of the goods sold himself or orders and pays for the transport.

From a financial point of view, let's take the example of a seller of food products subject to the 10% VAT rate, the VAT treatment is as follows:

• Sale of goods:
  • Sale of goods excluding VAT: 120€
  • VAT on sale of goods: 12€

Accuracy of the transport amount on the invoice without dissociation

This is the case, for example, when a sale is made under “arrival” conditions (fixed port). The seller is responsible for the transport and invoices the transport by paying on the invoice for the sale of the goods.

In this case, the applicable VAT rate is that of the goods sold. If goods are sold at different VAT rates, as a matter of principle, it is appropriate to break down the VAT rate applicable to each product line.

From a financial point of view, let's take the example of a seller of food products subject to the 10% VAT rate and other products subject to the 20% rate, the VAT treatment is as follows:

• Sales of goods at the rate of 10%:
  • Sale of goods excluding VAT: 50€
  • VAT on sale of goods: 5€
  • Excl. VAT of the transport service: 10€
  • 10% VAT on transport services: €1
• Sales of goods at the rate of 20%:
  • Sale of goods excluding VAT: 50€
  • VAT on sale of goods: 10€
  • Excl. VAT of the transport service: 10€
  • 20% VAT on transport services: 2€

Dissociation of transport

In the event of the sale of goods in conjunction with transport, the transport price may however be dissociated from the amount of the sale under the following conditions:

• it constitutes the effective and normal remuneration for the provision of services by the purchaser;
• the seller intended to separate and remunerate this service separately.

To do this, the transport must be separate from the sale and must be subject to specific remuneration paid by the purchaser.

In practice, these are companies that sell products under “departure” commercial conditions. This situation refers to the case where the buyer becomes the owner of the goods as soon as they leave the store.

It is then up to the buyer to organize the transport of his goods himself by using a carrier.

The seller's invoice then makes no mention of transport costs.

From a financial point of view, let's take the example of a seller of food products subject to the 10% VAT rate, the VAT treatment is as follows:

• Sale of goods:
  • Sale of goods excluding VAT: €100
  • VAT on sale of goods: 10€
• Transport service:
  • Amount excluding VAT: 20€
  • VAT on transport services: 4€

How do you navigate the management of these obligations?

As you can see, the applicable VAT rules on transport costs may be different depending on the contractual provisions.

It is important to correctly determine the nature of the contracts and then the resulting tax obligations because the methods of delivery will have consequences both in terms of taxation and in terms of accounting.

In particular, we note that it is possible to limit the impact of VAT on shipping costs, especially when the products delivered are at a reduced rate. A review of the methods applicable to the determination of VAT rates in terms of shipping costs is never superfluous and can lead to the optimization of margin rates.

Finally, we draw your attention to the importance of addressing these issues in the context of the reform of electronic invoicing where the management of invoicing flows relating to transport is a major challenge.