Is a French company that sells or buys services outside of France liable for VAT? What are the VAT rules on international services? VAT liability depends on the nature of the trade and the country of the trading partner. Does the company trade with a European Union (EU) country or with a third country?
The principle of service provision
The provision of services follows the same rules whether or not they are member companies of the European Union (EU). They are invoiced without VAT. The purchaser pays (or “auto-liquid”) VAT at the rate applicable in his country.
If the exchanges take place with a country of the European Union, they are intra-community transactions, formalized by a European declaration of services (DES).
VAT on international services: the services will be taxed at the place of establishment of the lessee (or buyer, or acquirer). Thus the European buyer “auto-liquidates” the VAT at the rate applicable in his country. (by the difference between deductible and collected VAT).
Example 1
A French company sells € 2,000 of marketing advice to VANDEPUTTE, a Belgian company.
For the Belgian customer, it is a purchase of intra-community services. It notes a charge and autoliquid the VAT at the rate in force in Belgium.
For the French supplier, this is a sale of intra-community services. The invoice will not include VAT, as this will be paid by the Belgian buyer. On the invoice will appear:
- the intra-community VAT numbers of French and Belgian companies. (It is always advisable to check the validity of the intra-community VAT number provided on the VIES system.
- the mention (not compulsory, but recommended): “Reverse charge by the lessee” (Art. 283-2 of the CGI or Art. 44 of Directive 2008/8).
The accounting entries will be:
706xxx Provision of services 2,000.00
411xxx Customer VANDEPUTTE 2,000.00
On the VAT return (CA3), enter the amount on line 5 (other non-taxable transactions, for € 2,000.
The DES (European Declaration of Services) is compulsory. It is up to the service provider (here in France) to complete it, no later than the 10th working day of the following month on the pro.douane.gouv.fr site.
Example 2
The company is now purchasing a service from FERRARI, an Italian company.
For the French customer, this is a purchase of intra-community services. The invoice will not include VAT.
On the invoice will appear:
- the intra-community VAT numbers of French and Italian companies.
- the statement equivalent to "Reverse charge" written in Italian.
The accounting entries will be:
6226xx Fees 2,000.00
401xxx FERRARI supplier 2,000.00
445 662 VAT deductible intra-community 400.00
4452xx VAT due intra-community 400.00
On the VAT return (CA3), you must write:
- online 2A (purchases of intra-community services): € 2,000.
- in line 8:
- the base for 2000 €
- VAT collected for 400 €
- online 20 (deductible VAT): 400 €
The lessee (the customer) does not complete the DES (European Declaration of Services).
Example 3
Our company now sells its service providers outside the EU to YILMAZ, a Turkish company.
For the French supplier, this is a sale of services outside the Community. The invoice will not include VAT.
On the invoice will appear:
- the intra-community VAT number of the French company.
- the mention (not compulsory, but recommended): “VAT exemption (Art. 283-2 of the CGI or Art. 44 of Directive 2008/8).
The accounting entries will be the same as before:
706xxx Provision of services 2,000.00
411xxx Client YILMAZ 2,000.00
On the VAT return (CA3), enter the amount on line 5 (other non-taxable transactions, for € 2,000.
The DES (European Declaration of Services) does not have to be completed.
Example 4
The same company is now buying services from JOHNSON, a UK company. The latter is no longer in the EU since January 1, 2021. (See our article Brexit ).
For the French customer, this is a purchase of services outside the Community. The invoice will not include VAT.
The accounting entries will be:
6226xx Fees 3,000.00
401xxx JOHNSON supplier 3,000.00
Reverse charge of VAT
445 663 deductible extra-community VAT 600.00
4453xx VAT due outside the community 600.00
On the VAT return (CA3), you must write:
- online 2 (other taxable transactions): € 3,000.
- in line 8
- the base for 3,000 €
- VAT collected for 600 €
- online 20 (deductible VAT): 600 €
The lessee (the customer) does not complete the DES (European Declaration of Services).
For details, please visit our website.
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