To avoid losing some readers because we know how complex the VAT system is, we will start at the beginning!

In general, VAT or Value Added Tax is a tax on consumption expenses. It is an indirect tax because it is not directly collected by the state; the seller collects the VAT paid by the consumer and transfers it to the state. At first it was a national tax which then developed internationally. Today, there are 2 international VATs that apply according to special rules: the intra-Community VAT and the extra-Community VAT.

After analyzing what is the intra-community VAT (insert link here), we are going to focus today on the extra-community VAT. This VAT applies to your transactions with countries outside the European Union. It is therefore not to be neglected.

Do not confuse: extra-Community and intra-Community

Be careful not to confuse extra-Community VAT with intra-Community VAT. Although they both refer to a cross-border VAT, they are not subject to the same rules.

Indeed, the intra-Community VAT applies to transactions between European Union (EU) member states, the rules of which you can find here (article Intra-Community VAT), and the extra-Community VAT which is on an international scale, outside the European Union member states.

In this article, we will therefore deal with the VAT rules applicable to trade between an EU country and a country outside the EU.

What is the extra-Community VAT?

Extra-Community VAT represents the VAT rules that apply to trade between an EU country and a country outside the European Union.  It is subject to a set of extra-Community rules.

In principle, exports are exempt from VAT, while imports are subject to the VAT of the country of destination.

The Sale

Of a good

When selling a good to a customer (B2B or B2C) outside the EU, the sale is considered as an export, so VAT will not be applicable and will have to be mentioned on the invoice: “VAT exemption according to article 262 ter I of the CGI”. You can still deduct the VAT from the expenses that allowed you to produce the good.

of A service

In the context of a service, the VAT is also exempted, according to article 283-2 of the CGI. Like the sale of goods, the VAT is deductible on the expenses of the development of the service.

However, in the case of B2B (business to business) services, the place of taxation to be considered is the place of establishment of the beneficiary of the service. For B2C services (business to consumer), it is the place of establishment of the service provider.

The Purchase

Of a good

When purchasing goods for commercial purposes from a non-EU supplier, you must pay VAT in the place of importation in addition to any potential duties.

As a reminder, since the European Union is a single market and therefore an economic “territory”, the place of importation will be the first European territory where the goods are delivered, before they reach you, for example.

of A service

When purchasing a service from a non-European professional whose country is not a member of the European Union, you must pay the VAT of your own country.

However, the invoice of the service provider will not include VAT, the buyer will have to self-liquidate the VAT at the rate applicable in his country on the VAT return.

Services between taxable persons under French law.

For more information about services between taxable persons in France, please visit www.impots.gouv.fr

If you need more detailed information according to your case, contact us via the email address international@akoneo.fr