French Finance Bill for 2021
In two judgments of Sept. 21, 2017 (BANKA and AVIVA), the Court of Justice of the European Union (EUCJ) ruled that the VAT regime for independent group of persons (in French groupements autonomes de personnes ou de moyens, “GAP”, article 132-1-f of the VAT Directive implemented by article 261B of the French Tax Code) under which the services provided by a grouping to its members carrying out an activity exempt from VAT or outside the scope of VAT are exempt from VAT, concerns only groups whose members carry out an activity of general interest, which would exclude the banking and insurance sectors.
The modification of the scope of application of the groupings of means regime, transposed to Article 261B of the French Tax Code would result in an additional cost for companies in the banking and insurance sector on their intra-group transactions.
In this context, Finance Law (PLF) for 2021 provides for the establishment of a VAT Group regime within the meaning of Article 11 of the VAT Directive and the modification of the scope of the regime for independent groups of persons (Article 261 B of the CGI) which would no longer apply to operations carried out in the field of health, education, as well as services provided by non-profit organizations.
The entry into force of this new system will be gradual: the first French VAT groups will be able to emerge from January 1, 2023 for companies that will have exercised the option before October 31, 2022. The option will be valid for a period of time of 3 years.
This regime will make it possible, under certain conditions, to consider the VAT group as a single taxable person, so that all invoicing flows between members of the VAT Group will be considered as transactions outside the scope of VAT; the group will have its own VAT number and will file common monthly VAT returns.
The TVA Group must appoint from among its members a representative in charge of all the obligations of the TVA Group and the payment of VAT, each member of which will nevertheless remain jointly and severally liable.
With regard to deduction rights, each member of the group will become a separate business sector.
It is now urgent for Bank and Insurance companies to check whether they must put into place a VAT grouping to replace a GAP, and to define precisely its scope and functioning.