France builds golden bridge for undeclared distance sales conducted before 1 July 2021

Under the regulations in force until 30 June 2021, companies supplying B2C customers in the EU through distance sales had to register for VAT in the destination country if certain thresholds were exceeded and then pay VAT in that country. Companies often neglected to do this. The French tax authorities are now providing a way to rectify this omission without incurring penalties.
Alert: This opportunity is only for a limited time..

As is well known, new rules regarding EU distance sales to B2C customers took effect on 1 July 2021. If a uniform, EU-wide threshold of € 10,000 is exceeded, these transactions are taxable in the Member State where the movement of goods ends. VAT registrations in many Member States can be avoided by using the one-stop-shop principle.

Until 30 June 2021, there was no one-stop-shop available for distance sales, which meant that businesses had to register, invoice, and pay local VAT when exceeding individual thresholds in the destination countries. With the introduction of the new distance sales regulations on 1 July 2021 and the resulting audit of their own supply chains, some entrepreneurs found that registrations were also required under the old regulation, but that these were not done.

The French tax authorities have addressed this issue and created a golden bridge for entrepreneurs who have failed to do so. Those who subsequently declare the sales covered by the old regulation by 30 September 2022, will only have to pay interest on the arrears. Those who fail to do so before the deadline will face a penalty of 80% of the tax amount in arrears. The statute of limitations period will be extended from three to ten years.

If you could be affected by this, please contact us. Together with our French colleagues, we will be happy to work out a respective VAT declaration.

(Dated: 8 June 2022)