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French u-turn on reduced VAT will stay at 5.5%

  • Nov 13, 2013 | Richard Asquith

French u-turn on reduced VAT will stay at 5.5%

The latest French Finance Act for 2014 will not now include a drop in the reduced 5.5% VAT rate to 5%.

Confusion on French VAT increase

There have been many announcements on changes to the French VAT rate in the past year.  This included an abandoned plan to raise the standard French VAT rate from 19.6% to 21.4% in 2012.  This was dropped after the Socialist government won the Parliamentary elections.  It then subsequently announced that the French VAT rate would rise to 20% from 1 January 2014.  This rise is still scheduled to go ahead.

There were also announced plans to raise the 7% rate (restaurants etc) to 10%.  This will also still go ahead on the 1 January 2014.

The second reduced rate of 5.5% (food, power, books) was to be lowered to 5%.  However, this cut has now been stopped in the Finance Act.

In accordance with the EU VAT Directive, member states must maintain a standard VAT rate of 15% or above on most goods and services.  They are permitted to reduced VAT rates for public services, foodstuffs, domestic power and other sensitive goods and services.  There is also a zero rate (e.g. education), and some products are exempt (e.g. financial services).

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.