In a bid to modernize and streamline its business processes, France is set to implement mandatory B2B e-invoicing and e-reporting from July 2024 to January 2026. This new e-invoicing mandate will bring in the Continuous Transaction Controls (CTC) model, which affects all companies operating in France. The CTC model is aimed at improving efficiency, cutting costs, and combating fraud by providing the French tax authority access to transaction data. This will have a significant impact on businesses’ operational processes, financial systems, and staff. Let’s explore these details further.
Maria
Last Updated on 11 May 2023Which new laws have been passed?
France has passed Ordinance No. 2021-1190, which mandates e-invoicing for domestic B2B transactions and e-reporting of transactional data for cross-border B2B transactions, B2C transactions taxable in France, and payment data for services. B2G e-invoicing has already been mandatory in France since January 1, 2020. Private companies will need to implement electronic invoicing and reporting of accounting data based on new tax guidelines developed by DGFiP. France will conduct a pilot phase from Jan 3 to Jun 30, 2024, before launching mandatory B2B e-invoicing on Jul 1, 2024.
E-invoicing and e-reporting goals
As part of the implementation of the new e-invoicing and e-reporting system, the government has set the following goals:
- Combat tax fraud and prevent it from happening.
- Reporting obligations for VAT should be simplified.
- Reduce the costs of tax control.
- Simplify business life and enhance competitiveness.
- Improve understanding of the economic situation with real-time reporting on business activity.
How does E-invoicing work in France?
“E-invoicing” means sending and receiving invoices electronically in a specific format with certain required information. French companies must use e-invoicing when sending invoices to other French business customers.
How does France’s E-reporting work?
“E-reporting” is the process of sending certain transaction data to the French tax administration. This is required for transactions that don’t fall under the e-invoicing mandate, such as those with private consumers (B2C) or customers outside of France. Even though e-invoicing isn’t required for these transactions, the data still needs to be submitted to the French tax administration. E-invoicing will help the French tax administration pre-fill VAT returns for taxpayers. However, e-reporting doesn’t cover imports of goods because Import VAT will now be reported through the VAT return, with data communicated by importers through the customs declaration.
Does the law apply to everyone?
If your company is based in France and registered for VAT, you will need to start sending electronic invoices to other businesses in France. But if your company is based outside of France, you may not need to follow this rule, unless you’re registered for VAT in France and selling to individuals instead of businesses. There are some services that are exempt from VAT, like banking and medical services, so you don’t need to send e-invoices for those.
How long will the implementation take?
All transactions carried out between VAT taxable persons established in France must use the electronic invoicing process according to the following schedule:
- From July 1st 2024 for large companies; Company whose workforce is greater than or equal to 5,000 people. Its annual turnover exceeds 1,500 million euros or its balance sheet total exceeds 2,000 million euros.
- From January 1st 2025 for mid-sized companies; Company employing between 250 and 4,999 people, achieving either an annual turnover of less than 1.5 billion euros, or a balance sheet total of less than 2 billion euros. A company that has less than 250 employees, but more than 50 million euros in turnover and more than 43 million euros in balance sheet total, is also considered to be an ETI.
- From January 1st 2026 for small and medium-sized enterprises as well as for micro-enterprises. Company whose workforce is less than 250 people. Its annual turnover is less than or equal to 50 million euros or its balance sheet total is less than or equal to 43 million euros.
The obligation to receive invoices in electronic format will be mandatory from July 1st 2024 for all companies, regardless of their size, as soon as their supplier is required to issue in electronic format.
Are there any payment data requirements?
Under the e-reporting mandate, French companies must report payment information for invoices or sales where the payment date is used to determine the tax point. This is to help the French Tax Administration pre-fill VAT returns and determine the VAT collected. However, this does not apply if the supplier is authorized to pay VAT on an accrual basis or if the customer is liable for VAT under the reverse-charge mechanism. The payment information to be reported is likely to include the date of payment collection and the amount collected (including VAT and VAT rate, if applicable).
What are the penalties for not complying with the new e-invoicing archiving requirements?
Failure to comply with these archiving requirements can result in significant penalties and fines from the French tax authorities, and this will be:
- €15 per invoice limited to €15,000 total per annum for taxpayers
- €15 per invoice limited to €45,000 sum per annum for e-invoice certified agents (PDP, Plateformes de dématérialisation partenaires)
Therefore, businesses must ensure that their e-invoicing and archiving processes comply with French regulations.
Should you require more information or have questions regarding this new regulation, our team is here to assist you. Please feel free to reach out to your account manager or contact our Sales team for further guidance and support. We are committed to helping you navigate through these changes and ensuring your business remains compliant with the latest regulations.
