France at odds with EU on VAT Recovery rules
- Dec 31, 2012 | Richard Asquith
The 8th Directive provides a mechanism for the EU countries without a permanent establishment and VAT number in Franceto recover any French VAT suffered. For example, attending conferences or buying local goods for non-export. France also makes extensive use of the EU Reverse Charge rule as a way of preventing foreign companies from seeking to French VAT registering. This means VAT Recovery is an important alternative for foreign businesses.
In a recent case at the European Court of Justice, it was held that the if a company has a 1) permanent establishment from which it can 2) operate, then it may not use the 8th Directive VAT Recovery mechanism. However, the French tax code does not require that a company satisfies both conditions to be refused French VAT recovery. Instead it must use a VAT registration. A change of the French tax code may therefore be required.