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France withdraws VAT Répondant scheme increasing cash flow burden

  • Aug 11, 2012 | Richard Asquith

France withdraws VAT Répondant scheme increasing cash flow burden

From the 1 October 2012, non-resident VAT companies trading in France will no longer be permitted to use the VAT répondant scheme, which helped them reduce their French VAT cash flow risks.  This change follows a ruling by the European Court of Justice that the scheme did not comply with EU VAT rules.

The current scheme, known in France as the Adminstration Tolérance, helped non-resident VAT traders importing into France mitigate the 2006 French VAT regime changes.  These changes meant that non-resident importers into France could no longer register for French VAT or charge VAT on the onward sale if the recipient was a French VAT registered business.  Instead, the reverse charge procedure applied.  This left many importers with a VAT import bill to recover, which meant cash flow delays through an 8th or 13th VAT Directive reclaim for EU or non-EU companies respectively.

To overcome this burden, the French tax authorities permitted importers to bring the goods in on the French VAT number of a special fiscal representative, known as the Répondant, who could then charge output VAT.  This did require the approval of the final customer.

However, following a recent ECJ ruling, the French have been obliged to withdraw this mechanism.  In future, importers will have to revert to VAT recovery through a formal claim in their home country.

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 is part of the European leadership team which won International Tax Review's 2020 Tax Technology Firm of the Year. Richard trained as an accountant with KPMG in the UK, and went on to work in Hungary, Russia and France with EY.