The French tax authorities have recently published guidance demonstrating their practical approach to how UK businesses would be affected for VAT purposes in the event of a hard Brexit.
No Fiscal Representative Requirement
UK businesses can breathe a sigh of relief as the guidelines confirm they will not be required to appoint a VAT fiscal representative to manage their VAT reporting obligations. Therefore, a UK business would still be able to take care of its own compliance and filing responsibilities (for instance, making direct registration applications). It would also keep the same VAT number.
This measure will significantly reduce UK companies’ administrative burdens and importantly keep expenses to existing levels.
This stance is interesting since it is contrary to the position that is being taken in many other Member States, for example, Belgium and Spain. The new guidance provides that only in the case of the UK company making VAT recovery claims would a fiscal representative be needed to act on their behalf.
New VAT Registration Form for Foreign Companies
An EU-wide trend that France is firmly adopting however is that of data gathering. The new VAT registration form for foreign EU companies contains additional requirements that need to be disclosed. This relates to the number of employees that the company has taken on in France and also if the company must pay withholding tax on those salaries.
Additionally, the French VAT return has acquired an additional box for completion. There is now a requirement to report the value of any import VAT being recovered separately, away from “regular” French input tax.
It’s not entirely clear as to why France has taken the moves detailed above. One thought however is that it is trying to minimise the number of registrations it manages and reduce administration.
Not creating fiscal representation obligations will relieve the tax office of processing many new applications which would be costly. The move to obtain new data is likely part of a drive to reduce registrations (something seen already) by not allowing businesses to submit VAT returns when there is only VAT to recover. This will reduce the frequency of which VAT is refunded, because claims have to be made via the refund directive instead. This is beneficial for France’s cash flow position.
Regardless of the rationale, businesses should heed the changes and take steps to ensure any impact from them is managed effectively.