Am I required to register for VAT?
Every day, a crucial question.
A clear and concrete answer every day.
Excerpt from the book “50 Answers to Our Entrepreneurs”, written by François Cattin, founder of the Group Les Experts Unis.
The book was completely updated and rewritten last September.
Regardless of the company structure, it's always possible to avoid VAT. But it has to be done intelligently!
There is a threshold: the basic franchise. It applies to all businesses.
This threshold (the franchise is the base) is the turnover below which the tax authorities tell us: you can not apply VAT!
So, if that's the company's wish, below this turnover threshold, the company can say I don't collect VAT. But I don't deduct it either.
The basic franchise model has always existed, even long before micro-enterprises.
A company is exempt from VAT, so it indicates on its invoices and quotes: "VAT not applicable, article 293 B of the French General Tax Code."
The threshold varies depending on the company's activity and on the turnover of the current year and the previous year.
Therefore, the company's turnover must have exceeded the threshold in the previous year and the current year for VAT to apply.
And this was the case from this second overtaking maneuver.
Expert advice:
If your clients are themselves subject to VAT, meaning if they are businesses, they will be able to reclaim the VAT you charge. Both you and your clients will be working on a VAT-exclusive basis. Therefore, it is in your best interest to be registered for VAT. This will allow you to reclaim VAT on your purchases and investments, and avoid paying payroll tax (approximately 4% to 14% of gross salaries).
If your customers are individuals, they will consider prices inclusive of all taxes (TTC) because they cannot reclaim the VAT. For individuals, the purchase price is sufficient in itself. Whether or not VAT is included is irrelevant; they simply judge the price. Therefore, the price accepted by individuals is inclusive of all taxes (TTC), regardless of whether VAT is included or not.
If your business doesn't exceed the thresholds, and if the investments aren't too significant, then you can seriously consider the basic franchise model. However, this depends on whether the gross profit generated by your business, while respecting the basic franchise thresholds, allows it to operate effectively.