The French Inspection Générale des Finances (‘IGF’) has recently issued its November 2019 report ‘SÉCURISATION DU RECOUVREMENT DE LA TVA’ (Securing VAT Recovery). The report analysed various options for France to tackle VAT fraud and modernising the collection of VAT.

The main two options for France to tackle VAT Fraud analysed in the report were:

  1. Implementing a split payment mechanism; in addition to
  2. The role of the fiscal representative for Non-EU established entities.

Split-payment mechanism

The split payment mechanism involves the collection of VAT by the payment operators such as credit card merchants, banks etc. These financial institutions would effectively collect the VAT in the payment process by splitting the net element. This would go to the supplier and the VAT element, paid directly to the tax authorities.

The IGF concluded that the split payment mechanism would be a disproportionate means of combating VAT fraud. This is due to the complexity of its implementation and the cost of doing so. Whilst this has recently been introduced in Poland for some fraud sensitive products, Romania abolished the mechanism. This is due to the European Commission determining it is not compatible with the EU VAT Directive and freedom of services.

Fiscal Representation

A Fiscal Representative is where a local VAT agent will act on behalf of a non-EU established business and become jointly and severely liable for their VAT liabilities. The IGF concluded that the use of fiscal representation for non-EU established businesses plays an important role in the collection of VAT and combating VAT fraud. Therefore it will remain in place regardless of new rules introduced to tackle e-commerce VAT fraud.

Therefore, when the new rules are introduced for online marketplaces to ensure they check seller’s VAT registrations and report transactions, there are going to be a sudden influx of VAT registrations for non-EU established online sellers.

In light of the above, the IGF have concluded that fiscal representation must remain, it has also made some recommendations in modernisation this scheme by:

  • Making marketplaces fiscal representatives for that element of the VAT on their platforms;
  • Centralising the VAT affairs of foreign companies in France to the non-resident tax department (DINR) to ensure consistency of rule enforcement;
  • Allowing registration applicants and returns signed by electronic signatures; in addition to
  • Removing the French language only requirements for applications.


The UK leaving the EU will also mean many UK business becoming non-EU established businesses. This could lead to a need for fiscal representation in France. However, the French tax authorities have previously advised that for UK businesses there would be no requirement to appoint a fiscal representative post-Brexit. This stance hasn’t changed to date.

This would be good news for UK businesses. The IGF estimates there are currently only 10 businesses in France offering a fiscal representative service with 200-300 clients. They also currently charge between €1,000 to €3,000 per year. These costs will only increase should the demand for fiscal representation increase over the next couple of years. Something UK businesses will certainly want to avoid on top of other Brexit related costs and administration requirements they are likely to incur.

For further advice on fiscal representation and other Brexit related topics, please contact one of our VAT experts.


By |February 4th, 2020|