VATLive > Blog > France > France sceptical on VAT fraud split payments

France sceptical on VAT fraud split payments

  • Dec 23, 2019 | Richard Asquith

The French national audit office, Inspection Générale des Finances (‘IGF’), has come out against the introduction of VAT split payments as a method to limit e-commerce VAT fraud.

Split payments, also known as Withholding VAT, requires a third party in a chain between a seller and customer to hold back the cash VAT element of a transaction, and pay directly to the tax office. The aim is to reduce VAT errors and fraud, particularly by foreign online e-commerce sellers.

The IGF made the following summary conclusions on a split payment regime for France:

  • It would represent a disproportionate measure to combat fraud in terms of reconfiguration of systems of sellers and payment providers (e.g. credit card companies).
  • Whilst several models already operate internationally, including restricted bank accounts (Poland) and withholding by credit card companies (Argentina), it has not be shown to remove all types of fraud. This means that revenue increases are uncertain, and related amounts of fraud are unclear.
  • The adaptation costs for payment providers could also be disproportionate. The IGF puts the expense at between €1.4 and €3.4 billion.
  • With plans to introduce French VAT e-invoice regime from 2023, the requirement for split payments may be obsolete.
  • Lastly, the IGF pointed out that such a split payment may contravene the operation of the EU VAT Directive. As such, it would require unanimous approval by all member states.

Need a fiscal representative in France?

Non-EU businesses selling in France will need to appoint a fiscal representative alongside completing VAT registration and returns.
Fiscal representatives are responsible for the accurate VAT submissions of their non-EU clients.
Avalara offers a Fiscal Representative Service as part of its international VAT and GST Registration and Returns Service.

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Researching French VAT legislation is the first step to understanding your VAT compliance needs. Avalara has a range of solutions that can help your business depending on where and how you trade. 

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VP Global Indirect Tax
Richard Asquith
VP Global Indirect Tax Richard Asquith
Richard Asquith is VP Global Indirect Tax at Avalara, helping businesses understand their compliance obligations as they grow globally. He can be contacted at: richard.asquith@avalara.com. He is part of the European leadership team which won International Tax Review's 2019 Tax Technology Firm of the Year. Richard qualified as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.
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