Service in France, invoicing abroad: A lawyer's guide to understand everything about VAT

Are you providing services from France for a customer established abroad and are you wondering if you should charge VAT? You are not alone. It's one of the most frequently asked questions — and the most dreaded — from business leaders working internationally.

The answer, as is often the case in tax matters, depends on multiple parameters : the place of establishment of your customer, his status as a taxable person or not subject to VAT, the nature of the service provided, and the territoriality rules resulting from the European directive 2006/112/EC, transposed into French law in French law in articles 259 and following of the General Tax Code (CGI).

An error in the application of these rules can have significant consequences: VAT unduly charged (and therefore paid incorrectly), tax adjustment in the event of an audit, or conversely, VAT not collected when it should have been collected. The financial challenges are real and the risks of litigation are significant.

This guide aims to give you a clear, structured and operational vision of the rules of VAT applicable when a service is performed in France and invoiced to a foreign customer — whether located in the European Union or outside.

VAT France: the fundamental principles of the territoriality of services

How is VAT collected on the provision of services abroad? The general framework

When it comes to VAT, the central question is not knowing where the service is physically performed, but where it is reputed to be located in the sense of territoriality rules. It is this fiscal location that determines in which country VAT is due, at what rate, and by whom.

The rules on the territoriality of VAT applicable to the supply of services are derived from the Directive 2006/112/EC of 28 November 2006 relating to the common system of value added tax. They have been transposed into French law to Articles 259 to 259 D of the General Tax Code.

The fundamental principle can be summarised as follows: the place of taxation of a supply of services depends primarily on the quality of the customer (subject to or not subject to VAT) and, in some cases, the nature of the service itself.

For each transaction, it is therefore appropriate to ask three questions in the following order:

First question : is the customer a subjugated to VAT (professional acting as part of their economic activity, what is called a “B to B” transaction) or a not subject (individual or person acting in a private capacity, “B to C” transaction)?

Second question : does the service fall under the general rule of territoriality (article 259 of the CGI) or of one of derogatory rules provided for in articles 259 A to 259 D of the CGI?

Third question : who is the accountable of VAT — the service provider or the customer — and what are the resulting reporting obligations?

The concept of taxable person: an essential prerequisite

A VAT taxable person is a person — natural or legal — who carries out an economic activity independently within the meaning of article 256 A of the CGI. This covers all activities of producers, traders or service providers, including the liberal professions.

An important point deserves to be emphasized: for the application of territoriality rules, the concept of taxable person is wider than that usually used to determine the scope of VAT. Thus, a company benefiting from the Exemption based on VAT (micro-entrepreneur, for example) is considered taxable for the purposes of territoriality rules, even if it does not collect VAT in normal times. Likewise, a legal person not subject to VAT but identified for VAT (for example for its intra-community acquisitions) is treated as a taxable person.

Concrete example : You are a strategy consultant in Paris and you are carrying out an assignment for a German company with an intra-community VAT number. This company is subject to VAT in the sense of the territoriality rules, even if some of its transactions are exempt in its country. You will therefore apply the “B to B” rules.

Article 259-1 of the CGI: the general rule for benefits between taxable persons (B to B)

The principle: VAT is due at the place of establishment of the customer

Article 259, 1° of the CGI transposes article 44 of Directive 2006/112/EC and establishes the general rule applicable to the supply of services supplied to a taxable person acting as such: the benefit is taxable at the place where the lessee is established.

Concretely, this means that when a French service provider provides services for the benefit of a professional client established in another country — whether or not it is a member of the European Union —, the service is not taxable for French VAT. It is the VAT of the customer's country that applies, and it is the customer himself who is liable for it.

More precisely, the place of the service is located in France when the taxable customer has in France the seat of its economic activity (unless it has a permanent establishment in another country to which the services are provided), or a permanent establishment to whom the services are provided, or failing that, its home or usual residence.

Conversely, the place of the service is not steps located in France when the taxable customer meets these same conditions in another State, whether within the European Union or outside.

What this means in practice for the French service provider

If you are a service provider established in France and your client is a taxable person established outside France (in the EU or outside the EU), you must draw up your invoice excluding taxes, that is to say without applying French VAT.

The mention to be made on the invoice varies according to the customer's place of establishment:

If the customer is a taxable person established in another EU Member State : the invoice must be marked “Reverse charge” (or “Reverse charge — article 196 of Directive 2006/112/EC”). You must also include your intra-community VAT number as well as that of your customer.

If the customer is a taxable person established outside the EU : the invoice must be marked “VAT not applicable — article 259-1 of the CGI”.

Concrete example : A Parisian law firm carries out a legal advisory mission in business law for a Swiss law company. The Swiss company is a taxable person established outside the European Union. The firm invoices its service excluding taxes with the mention “VAT not applicable — article 259-1 of the CGI”. Where appropriate, the Swiss company will apply the VAT rules in force in its country.

Another example : A French communication agency designs an advertising campaign for a Spanish company with an intra-community VAT number. The agency invoices without taxes with the mention “Auto-liquidation”. The Spanish company will autoliquidate Spanish VAT in its own declaration.

Intra-community VAT: how to charge VAT for a foreign customer in the EU?

The mechanism of reverse charge of VAT between European countries

When a French provider provides services falling under the general rule to a taxable customer established in another Member State of the European Union, the applicable mechanism is that ofreverse charge of VAT.

Reverse charge is a device by which the burden of declaring and paying VAT is transferred from the provider to the lessee. The French service provider invoices without taxes; the European professional customer declares and pays VAT in his own country, at the rate in force locally, directly to his tax administration.

This mechanism, provided for in Article 196 of Directive 2006/112/EC and transposed in France to thearticle 283, 2 of the CGI, aims to simplify intra-Community trade by avoiding that the service provider has to register for VAT in each Member State where he carries out transactions.

The reporting obligations of the French service provider

Even if the service is not subject to French VAT, the service provider keeps reporting obligations important:

The amount excluding taxes for the service must appear in the section “Other non-taxable transactions” of the VAT return (line E2 of the CA3 or line 03 of the CA12).

When the customer is established in another EU Member State, a European Declaration of Services (DES) must be sent to the customs administration Within ten days of the month following the payment of VAT (i.e. the performance of the service or the payment of the deposit). This declaration is mandatory from the first euro of invoicing.

Point of vigilance : the omission of the DES constitutes a declarative failure likely to result in sanctions. It is therefore essential to put in place a rigorous monitoring of these obligations.

The intra-community VAT number: an imperative

Any invoice sent to a professional customer established in another Member State must include the intra-community VAT numbers of the service provider and the customer. This number, composed of the country code (FR for France), a two-digit computer key and the SIREN number, is automatically assigned by the tax authorities when registering for VAT. Companies exempt from VAT that provide intra-community services must request that they be awarded to their Business Tax Service (SIE).

It is strongly recommended to check the validity of the VAT number of your customer before issuing the invoice, via the European VIES system (VAT Information Exchange System). An invoice issued with an invalid VAT number exposes the service provider to the risk of requalification of the transaction.

Article 283-2 of the CGI: the mechanism of reverse charge of VAT explained

Who is liable for VAT? The principle of reversal of liability

THEArticle 283 of the General Tax Code Define who is liable for VAT. The principle is simple: VAT is normally paid by the person who carries out the taxable transaction, i.e. the service provider or the seller of goods.

However, article 283 provides for several exceptions to this principle, the most important of which in terms of international benefits is set out in its Paragraph 2 : when the services mentioned in paragraph 1 of article 259 of the CGI are provided by a taxable person not established in France, the tax must be paid by the taker.

In other words, if your French company buys a service from a foreign provider (established in the EU or outside the EU) and this service is taxable in France under article 259-1° of the CGI (because you, the customer, are established in France), it is your business who is liable for VAT, not the foreign service provider.

How reverse charge works in practice

In practice, reverse charge works like a set of accounting entries that partially cancel each other out. A French company that receives the duty-free invoice from its foreign service provider must:

Declare the VAT collected : it enters the amount excluding tax of the service on the appropriate line of its CA3 declaration (line A3 “Purchases of services made from a taxable person not established in France” for an intra-community service provider, or line A2 “Other taxable transactions” for a service provider outside the EU), and it calculates the VAT corresponding to the applicable rate.

Deduct the corresponding VAT : if the company has a full right to deduct, it enters the same amount of VAT as deductible VAT (line 20 “Other goods and services” of the CA3).

The result is a neutral operation for the company, since the VAT collected and the deductible VAT are offset. Reverse charge does not involve additional costs for the policyholder — it simply imposes reporting obligations.

Concrete example : Your French company uses an independent IT developer based in Berlin to redesign your website. He charges you 10,000 euros excluding taxes with the mention “Auto-liquidation”. On your CA3 declaration, you declare 10,000 euros excluding tax on line A3, you calculate a VAT of 2,000 euros (20% rate) that you enter as collected VAT, then you deduct these same 2,000 euros in deductible VAT. The operation is neutral.

How do I charge a service to a customer abroad? The case of non-taxable persons (B to C)

The principle: the VAT at the place where the service provider is established

When the customer is a not subject (an individual, for example), the general rule is reversed compared to B to B. Article 259, 2° of the CGI provides that the benefit is taxable in the place where the provider is established.

In concrete terms, if you are a service provider established in France and you provide a service to an individual — whether residing in France, in another EU Member State or outside the EU — you must in principle apply the French VAT on your bill.

Concrete example : A French company carries out a genealogical study for an individual residing in Germany. The company invoices its service using the French VAT rate of 20%. The fact that the customer resides in Germany is irrelevant: French VAT applies.

Important exceptions to be aware of

However, the general B to C rule includes: numerous exceptions, provided for by articles 259 A to 259 D of the CGI. For certain specific benefits, the place of taxation is determined not according to the establishment of the provider, but according to other criteria. Some of the main exceptions are:

Les benefits associated with real estate (real estate works, architectural services, real estate agent services) are taxable where the building is located (article 259 A, 2° of the CGI), regardless of the status of the client.

Les passenger transport services are taxable according to the distances travelled on French territory (article 259 A, 4° of the CGI).

Les provision of electronic, telecommunications and broadcasting services supplied to non-taxable persons within the EU are taxable at the place of establishment or residence of the customer (article 259 D of the CGI), beyond a threshold of 10,000 euros in annual turnover on this type of transaction.

Les intangible benefits referred to in article 259 B of the CGI (transfers of copyright, consultancy, advertising, data processing, etc.) provided to a non-taxable person established outside the EU are not taxable in France.

Concrete example : A French digital marketing consultant provides strategy consulting services to an American individual entrepreneur (not subject to taxation). These services fall under article 259 B of the CGI (consulting services). They are not taxable in France. The consultant invoices without taxes.

Another example : A French architect designs the plans of a building located in Spain for a French individual. The service is related to real estate located in Spain: Spanish VAT applies, in accordance with article 259 A, 2° of the CGI.

BOI-TVA-CHAMP-20-50-30: derogations from the general rules

Benefits that are exempt from the general rule

The official bulletin of public finances WOOD-TVA-FIELD-20-50-30 details the provision of services that derogate from the general rules of territoriality in article 259 of the CGI. These derogations apply whether the customer is subject to taxation or not, which distinguishes them from the specific rules specific to B to C.

These derogatory benefits are listed inArticle 259 A of the CGI. They are taxable according to specific criteria linked to the nature of the service itself, regardless of the place of establishment of the customer or the service provider:

Les short-term transport rentals (30 days maximum for land vehicles, 90 days for ships) are taxable at the place where the means of transport is actually provided.

Les benefits associated with real estate are taxable at the location of the building. This includes construction, renovation, decoration, the services of real estate experts, the services of architects and contractors, and real estate management services.

Les sales to be consumed on site (catering) are taxable at the place of physical performance of the service.

THEaccess to cultural, sporting and educational events and the like is taxable at the place where the event is actually held.

Why are these exemptions crucial for businesses?

These derogatory rules can have considerable financial and administrative consequences. If your benefit is subject to an exemption, the general rule does not apply : you must apply the VAT of the place determined by the specific rule, which can mean French VAT even if your customer is established abroad — or vice versa, foreign VAT when you are established in France.

Concrete example : A French consulting firm carries out a technical diagnosis on an office building located in Paris on behalf of a Luxembourg company. Although the customer is a taxable person established in Luxembourg (which, as a general rule, would lead to tax-free invoicing), the service is related to real estate located in France. French VAT applies. The firm must charge 20% TTC.

Another example : A French trainer leads a three-day seminar in a hotel in Barcelona on behalf of a Belgian company. Access to this educational event is taxable in the place where it is actually held, which is Spain. The trainer will potentially have to register for Spanish VAT or use the one-stop shop (OSS).

The particular case of electronic service provision

The benefits of electronic, telecommunications and broadcasting services provided to non-taxable persons comply with a specific regime provided for in article 259 D of the CGI. When these services are provided to an individual established in another EU Member State, they are taxable at the place of residence of the client — and not at the place of establishment of the provider — as long as the annual turnover generated from these transactions exceeds 10,000 euros. Below this threshold, the service provider can opt for the application of French VAT.

To facilitate the declarative management of these transactions, the service provider can use the One Stop Shop (OSS — One Stop Shop), which allows it to declare and pay the VAT due in the various Member States from a single portal accessible on the impots.gouv.fr site. This system prevents the service provider from registering for VAT in each country where its customers live.

Concrete example : A French SaaS (online software) company sells subscriptions to individuals residing throughout Europe. Its intra-community B to C turnover exceeds 10,000 euros per year. It must apply the VAT of each customer's country of residence and can use the OSS one-stop shop to centralize its declarations.

How to charge a delivery in France to a foreign customer in VAT?

Deliveries of goods and services: an essential distinction

It is common to confuse the VAT rules applicable to deliveries of goods with those applicable to provision of services. However, these two categories of transactions obey distinct territoriality regimes.

For the deliveries of goods, it is the place where the goods are located at the time of delivery that determines the applicable VAT. If a good is delivered in France, French VAT is in principle due, even if the customer is a foreigner, unless the conditions for intra-Community delivery or export are met.

For the provision of services, the rules of article 259 and following of the CGI apply, as explained throughout this guide.

The classic trap: delivery in France with invoicing abroad

Many businesses make the mistake of thinking that the fact of Invoicing a foreign customer is enough to exempt them from VAT. It's a dangerous confusion. When it comes to the delivery of goods, it is not the billing address that counts, but the actual place of delivery And the Place of departure of transport.

If a good is sold and delivered physically in France to a foreign customer — without there being transport to another Member State or to a third country — the French VAT is due, regardless of the customer's nationality or billing location.

On the other hand, if the property is shipped or transported from France to another EU Member State for the benefit of a customer with a valid intra-community VAT number, the transaction can be qualified as intra-community delivery exempt from VAT (article 262 ter of the CGI), subject to justifying the reality of the transport by documentary evidence (CMR, transport documents, etc.).

Likewise, if the good is shipped outside the European Union, the operation is qualified asexportation, exempt from VAT (article 262, I of the CGI), provided that the required documentary evidence is available (customs declaration, bill of lading, etc.).

Concrete example : Your French company sells industrial equipment to a Brazilian company. If the equipment is shipped directly from the port of Le Havre to Brazil, it is an export exempt from VAT. But if the equipment is delivered to a warehouse in Lyon where the Brazilian company will pick it up itself without you being able to justify its effective export, French VAT is due.

Mandatory information on the invoice sent to a foreign customer

A practical summary according to the situation

The accuracy of the information on the invoice is a major issue. An incorrectly worded invoice can lead to a tax adjustment, a refusal to refund VAT for the customer, or administrative complications. Here is a summary table of the main situations:

This chart covers the most common situations. Exemption services (buildings, transport, events, electronic services) comply with specific rules that must be analyzed on a case-by-case basis.

The most common mistakes and the associated risks

The pitfalls you should absolutely avoid

The practice reveals a number of recurring mistakes made by businesses in applying VAT rules internationally. Each can have significant financial and legal consequences.

Applying French VAT incorrectly on an intra-community B to B service. This is the most common mistake. When the service provider invoices French VAT while the service is not taxable in France, the foreign customer bears VAT that he should not pay. The customer will then have to request a refund of French VAT (a long and binding procedure), while the service provider may not be able to recover the VAT collected incorrectly.

Omit the mention of reverse charge on the invoice. The absence of this mention constitutes a breach of billing obligations and may result in sanctions for the service provider. For the policyholder, it may complicate the exercise of his right to deduct.

Do not check the customer's intra-community VAT number. Issuing a tax-free invoice without having verified the validity of the customer's VAT number exposes the service provider to a risk of requalification: if the number is invalid, the tax authorities may consider that French VAT should have been invoiced.

Confusing the place of physical performance with the place of taxation. The fact that a service is physically carried out in France does not necessarily mean that French VAT is due. It is the place of the service in the fiscal sense — determined by articles 259 and following of the CGI — that takes precedence.

Neglecting reporting obligations. Even when the service is not subject to French VAT, the service provider must declare the transaction on his VAT return and, if applicable, complete the European Services Declaration within the required time.

The specific case of the franchise based on VAT

Businesses benefiting from the Exemption based on VAT (especially micro-entrepreneurs) are in a particular situation. In principle, they do not collect VAT and do not charge it to their customers. However, when they provide intra-Community services or buy services from a foreign provider, certain specific obligations are required.

If you are a franchise in base and you provide a service to a taxable person in another Member State, you must request an intra-community VAT number from your SIE and indicate it on your invoice. The service is still invoiced excluding taxes (you already do not collect VAT), but you must fill in the European Services Declaration.

On the other hand, if you buy a service from a foreign provider, you must in principle Auto-liquidate VAT on this service. However, being exempt in base, you do not benefit from the right to deduct: autoliquidated VAT therefore represents a real cost for your business. It is possible to opt for the normal real taxation regime in order to recover the right to deduct, but this option then applies to your entire activity.

Concrete example : A freelance graphic designer in a micro-enterprise (franchise in base) creates the graphic charter for a Dutch start-up. He asks for an intra-community VAT number, invoices without taxes with the mention “Reverse charge”, and fills in the DES. Its invoice also bears the mention “VAT not applicable — article 293 B of the CGI” under its basic franchise regime.

The importance of legal advice in international VAT matters

The territorial rules of VAT applicable to the supply of services constitute a matter. of considerable complexity. The relationship between general rules and derogations, between B to B and B to C transactions, between European directives and national transposition, requires a detailed analysis on a case-by-case basis.

The stakes are all the more important as VAT is a declarative tax: it is the company itself which determines the regime applicable to each of its transactions, under the subsequent supervision of the tax authorities. Any error, even in good faith, can lead to redress with penalties.

It is therefore strongly recommended to seek the advice of a lawyer. mastering tax law and international VAT law to analyze the exact nature of your transactions, determine the applicable VAT regime, secure your invoices and declarations, and anticipate control risks. The intervention of a legal professional makes it possible to prevent errors in advance and to defend your interests in the event of a dispute with the tax authorities.

FAQ: the most frequently asked questions about VAT, services in France and invoicing abroad

How do I charge a service to a customer abroad?

To charge a service to a customer based abroad, you must first determine whether your customer is a subject to VAT (professional) or a not subject (individual). If your client is a taxable professional, the general rule (article 259-1° of the CGI) provides that the service is taxable in the client's country: you therefore invoice excluding taxes, with the mention “Reverse charge” (EU customer) or “VAT not applicable — article 259-1 of the CGI” (customer outside EU). If your customer is an individual, you must in principle apply French VAT, unless the service is subject to a specific exemption (intangible services to a non-taxable person outside the EU, services related to a building located abroad, etc.). In all cases, you must mention your intra-community VAT number and comply with the applicable reporting obligations.

How do I charge VAT for a foreign customer?

The invoicing of VAT for a foreign customer depends on three factors: the quality of the customer (taxable or not), his place of establishment (EU or outside the EU) and the nature of the service. En B to B, the French service provider invoices without taxes and it is the customer who autopays the VAT in his own country. En B to C (individual customer), the French service provider in principle applies French VAT. Exemption services (real estate, transport, digital services) comply with specific rules that can change this pattern.

How is VAT collected on the provision of services abroad?

VAT on the supply of services abroad is collected in accordance with the rules of territoriality set by Directive 2006/112/EC and transposed to articles 259 and following of the CGI. The principle is that the benefit is taxable at the place of establishment of the taxable customer (in B to B) or at the place of establishment of the provider (in B to C). Exemptions exist for certain specific benefits. The person liable for VAT may be the service provider or the customer, depending on the case, pursuant to the reverse charge mechanism provided for in article 283-2 of the CGI.

How to charge a delivery in France to a foreign customer in VAT?

For a delivery of goods, it is not the billing location that determines the applicable VAT, but the actual place of delivery and the place of departure of the transport. If the goods are delivered in France without being transported to another country, French VAT is due, even if the customer is foreign. If the goods are shipped to another EU Member State to a customer with a valid intra-community VAT number, the transaction may benefit from the exemption for intra-community deliveries, subject to proof of transport. If the goods are exported outside the EU, the exemption applies for export, subject to customs documentation.

What is reverse charge of VAT (article 283-2 of the CGI)?

The reverse charge of VAT is a mechanism by which the liable for VAT is not the service provider but the customer of the service. Provided for in article 283-2 of the CGI, this system applies in particular when services are provided by a taxable person not established in France to a taxable customer established in France. The customer declares both the VAT collected and the deductible VAT on his own VAT return, making the transaction generally neutral. Reverse charge also applies in certain specific sectors (subcontracting in the construction industry, industrial waste, energy) regardless of the location of the service provider.

What is intra-community VAT?

Intra-community VAT refers to all the VAT rules applicable to the exchange of goods and services between Member states of the European Union. For the provision of services between taxable persons (B to B), the principle is that the service is taxable in the customer's country, with the application of reverse charge. For supplies of goods, intra-Community trade benefits from an exemption regime under certain conditions. The intra-community VAT number, assigned to each taxable person identified in a Member State, is the identification tool for securing these transactions and for verifying the commercial partner's status as a taxable person.

Article written by Guillaume Leclerc, business lawyer in Paris, 34 Avenue des Champs-Elysées

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