The tax system in France is relatively complicated. Indeed, in detail, this mille-feuille includes more than a hundred various taxes, not to mention the various taxes which depend on the amounts or the statuses. In this area, France is particularly creative. Thus, we offer you an overview of the main types of taxes in France and the different taxes to finish on corporate taxation.
- The aim is to relieve the administrative burden and reduce the tax obligations of these small businesses and self-employed workers. It is an exemption from the declaration and payment of VAT on the services or sales made. It is then sufficient to issue an invoice with a net amount and state the reason for missing sales tax information.
- It should also be noted that there is a different VAT rate for Corsica, Guadeloupe, Martinique, Reunion, as well as for French Polynesia.
In addition, for the same activity, there may be different VAT rates, such as for works of art. Indeed, the VAT rate for a sale of a work by the author (or the beneficiaries) is set at 5.5%. On the other hand, if the sale is carried out by a third party (art dealer or gallery owner for example), the rate is 20%. This example illustrates the complexity of taxation, so it is important to learn beforehand about the rules and exceptions specific to your sector of activity.
VAT in Europe: European Union directive
The VAT directive of November 2006 provides a legal framework for the application of the VAT rate in EU countries. But the situation remains quite disparate and complex, and the rates can therefore vary from one country to another. Although the VAT rate has increased in recent decades in France, it is within the European average. There are countries with a lower VAT rate such as Luxembourg (from 3 to 17%), but also with states with higher rates such as Sweden (25%) or Hungary (27%). While filing business taxes you will have to keep these things in mind. Also you will have to consider the whole processing solutions under the deals.
Calculate VAT: how it works
The calculation of value added tax is not complicated. A simple calculator is enough. Otherwise, there are many calculators online that simplify this calculation. Value added tax always refers to the net amount of your invoice.
Example: if you sell a service for 1000 euros net. The amount of VAT is then 200 euros (with a rate of 20%). You must therefore invoice 1,200euros to your customer. Otherwise, you can simply calculate this way:
- Gross amount = net amount x 1.20
- Net amount = gross amount: 1.20
With this simple calculation, you know exactly how much VAT you need to charge or pay.