Clarification of the conditions for adjusting incorrectly charged French VAT

The French tax administration has issued a new publication which clarifies the conditions for amending VAT invoices issued with incorrectly charged French VAT.

Background

Any business which charges VAT on an invoice is liable to pay that VAT by the mere fact of having invoiced it. As a result, any VAT wrongly charged is payable to the French VAT Authorities by the supplier as soon as it has been invoiced.

At the same time, the customer is not entitled to deduct this input VAT, since only the VAT that was correctly charged on the invoice is deductible. These legal rules have now been made more flexible, allowing the issuer of the invoice (albeit under strictly conditions) to regularise same on his own initiative, or at the request of the customer who has been wrongly invoiced.

On the 8th of January 2025, the French tax administration released a publication to clarify the regularisation process.

Clarification

In line with the principle of VAT neutrality, the French tax administration has now removed the condition proving that the incorrect VAT charge was a genuine error, in the event has been invoiced in error in respect of an exempt transaction or at a higher rate.

In addition, and as a reminder, when VAT is incorrectly invoiced, French VAT can in principle be rectified by the supplier within two years, whereby the French VAT Authorities had three years to reexamine the invoice

The French tax administration has now clarified that in the event that they challenge input VAT deduction, this constitutes a new element which opens a new claim period for the supplier (running until the 31st December of the second year following the challenge being made). This period then allows the supplier to rectify the invoice and within the same period, the customer can regularise his input VAT deduction.

This publication explicitly recognises that the questioning of the right to deduct French input VAT by the Administration is a new event, justifying the issuance of a rectified invoice.

Impact for your business

In practise, and as an example, if a supplier has incorrectly invoiced French VAT in 2022 and the customer’s right to deduct this VAT is rejected in 2025 as a result of a tax audit or via an application for a VAT refund;

• the supplier can issue an amended invoice without VAT in 2025 (where relevant), or
• the supplier may regularise the incorrect VAT initially collected by 31st December 2027 (whereas previously, in the absence of any clarification by the Administration, no new deadline was set, with the risk of the correction cut-off remaining 31st December 2024).
  

With the issuance of the publication, it means that there may now be an extended period within which to amend / deduct French VAT.

We would recommend that businesses review and identify such scenario where French VAT has not been regularised in order that your business is VAT compliant.