A French company owned by a foreign parent can move from the VAT exemption known as the franchise en base de TVA to ordinary VAT obligations in the middle of a commercial year. The practical problem is rarely the threshold alone. It is identifying the correct activity, calculating French turnover before VAT, finding the legally relevant day, obtaining or reactivating the French VAT identification number, and correcting invoices that were prepared under the exemption. A foreign shareholder, an overseas bank account or a customer outside France does not, by itself, change those steps.

This question belongs to the wider French company formation and compliance hub for international businesses operating in France.

This guide is for an SAS, SARL, French subsidiary or French establishment managed from abroad. It applies the official rules available on 27 August 2026. Main 2026 thresholds are €85,000/€93,500 for goods and accommodation and €37,500/€41,250 for services; the proposed €25,000 threshold is not in force. The Code recodification scheduled for 1 September 2026 may change references, not the liability date.

Act now: pause exempt-wording invoices; reconcile pre-VAT French turnover; separate base and increased thresholds; record the transaction crossing the increased threshold; contact the service des impôts des entreprises (SIE, French business tax office); obtain the VAT number; correct invoices; and prepare the first VAT return and evidence file. Consequences can differ for a subsidiary, branch, mixed business, EU seller using the small-business scheme or importer.

I. What VAT threshold applies to a foreign-owned company in France?

A. Which French turnover and activity thresholds trigger VAT?

The French VAT exemption for small businesses is a tax regime, not an exemption attached to a nationality or a corporate form. A company may be owned by a United States, United Kingdom, Canadian, Swiss, Singaporean or other foreign shareholder and still fall within the French regime if the conditions are met. Conversely, incorporating a French SAS does not postpone VAT merely because the parent company is abroad. The first question is whether the entity making the supply is established in France, or is treated as established there under the rules applicable to a foreign business with a French fixed establishment.

At the date of this article, Article 293 B of the French General Tax Code provides the central thresholds. For the ordinary activities of a company, the two figures operate as follows:

Activity	Base threshold for the previous year	In-year increased threshold	Consequence
Goods, on-site sales and accommodation	€85,000	€93,500	Base threshold usually affects 1 January of the following year; the increased threshold causes an in-year exit on the date it is exceeded.
Most services and liberal activities other than the special professions	€37,500	€41,250	Base threshold usually affects 1 January of the following year; the increased threshold causes an in-year exit on the date it is exceeded.
Regulated legal activity, qualifying authors and artists	€50,000 or €35,000 depending on the activity	€55,000 or €38,500 depending on the activity	Use the special table only when the activity falls within the statutory categories.

The figures are assessed without VAT. Article 293 D, in the version applicable before the September 2026 recodification, defines the reference turnover as the annual amount of goods and services supplied in France, expressed before VAT, subject to its specific inclusion and exclusion rules. The current text is available in Article 293 D of the French General Tax Code. That distinction matters for a foreign-owned company that has priced its services in euros, pounds or dollars. The amount received in a foreign currency must be converted for accounting and VAT purposes; the bank account where the money arrives does not determine whether the turnover is French turnover.

The two thresholds do not create a simple “safe zone” that can be read without looking at the year. If the previous calendar year exceeded the base threshold but did not exceed the increased threshold, the company normally keeps the franchise during the current year and becomes liable from 1 January of the next year. If the current calendar year exceeds the increased threshold, the franchise ends for the taxable transactions performed from the date of that excess. Official tax guidance describes this distinction for 2026: a service company that goes above €37,500 but remains at or below €41,250 can remain under the franchise for the year, while an excess of €41,250 creates an in-year liability from the day of excess.

For example, imagine a French software consultancy owned by an English parent. Its French turnover reaches €39,000 on 15 June 2026 and €41,300 on 3 October 2026. The first figure exceeds the €37,500 base threshold but not the increased threshold. The second figure crosses €41,250. The company must identify the supplies covered by the rule from 3 October, apply VAT to those taxable operations, and correct its invoicing from that date. If the second figure had never been reached, the company would generally continue the franchise for the remainder of 2026 and prepare for VAT from 1 January 2027 because of the prior-year threshold analysis.

Goods and accommodation follow the same logic with €85,000 and €93,500. A trading subsidiary that reaches €86,000 in 2026 but never exceeds €93,500 does not automatically add VAT to every invoice issued the next day. Its ordinary change of regime is normally tied to 1 January 2027. If it reaches €93,600 on 20 November 2026, the business must stop treating later taxable transactions as covered by the franchise from the legally relevant date. The invoice file must show the turnover total before and after the transaction that created the excess.

Mixed activities require a separate calculation. A company may sell hardware and provide installation or consulting services. It must test the overall goods threshold and the services threshold, because a services sub-limit can be exceeded while the total remains below the goods limit. The calculation should classify each invoice by the underlying supply rather than by the label used in the group reporting system. Article 293 D also contains rules about the composition of turnover, including operations that would be taxable without the franchise and specified exempt operations. It is therefore risky to assume that every receipt, every intercompany recharge or every sale of an asset belongs in the same total.

The date of incorporation creates another trap. The official explanation for a new business distinguishes the creation year from the following year. During the creation year, the increased threshold is the critical ceiling for the immediate loss of the franchise; the following-year analysis uses the previous-year turnover and, where appropriate, a pro-rata adjustment. The pro-rata rule for a company that begins its activity during the year is set out in Article 293 D. A foreign founder who starts a French subsidiary in September should therefore preserve the date on which the activity actually began, the date of the first supply and the date on which the business became operational. A Kbis is an official extract showing the company’s registration details; it is evidence of registration, not a substitute for the VAT activity timeline.

There is also a voluntary route out of the franchise. A company expecting substantial investment may prefer to collect VAT and deduct eligible input VAT rather than remain exempt from collection while absorbing VAT on its costs. Article 293 F of the French General Tax Code permits an eligible taxpayer to opt for VAT. The option has its own effective-date and duration rules. It is not the same legal event as exceeding the increased threshold, so a company must state whether it is notifying an option, reporting a mandatory exit, or doing both in sequence.

B. Does foreign ownership, a branch or an EU customer change the calculation?

Foreign ownership is not an independent VAT threshold. The French subsidiary is a separate legal person from its parent. Its French turnover, supplies, contracts and tax identification are analysed at the subsidiary level, subject to the statutory rules on the composition of turnover. A payment from the parent for a genuine service or a capital contribution must not be treated in the same way as a sale to a customer. The accounting description, contract, substance of the transaction and place of supply all matter.

A branch is different because it is not a separate legal person from the foreign company. The question becomes whether the foreign business has a French establishment and which operations are allocated to it. The definition rules in Article 293-0 B of the French General Tax Code address, among other matters, an entity whose economic head office is in a non-EU territory but which has a fixed establishment in France and elects to be attached to France for the small-business scheme. A branch file should therefore identify the establishment, the activities actually performed there, the contracts signed by the foreign company and any EU small-business notification. The branch should not simply copy the subsidiary’s threshold analysis.

An EU customer also does not answer the question by itself. A French company providing a business-to-business service to a customer in another EU member state may have to apply a reverse-charge rule, meaning that the customer accounts for VAT in its own country. That invoice can require a VAT identification number and an EU reporting obligation even though French VAT is not shown. The French turnover analysis still requires a classification of the transaction under the territorial rules. Article 283 of the French General Tax Code identifies situations in which the recipient becomes liable and also states that a person who shows VAT on an invoice can become liable by the very fact of invoicing. That is why an invoice should not mention “reverse charge” merely because the customer is foreign.

For a French business providing services to a foreign group company, the transaction should be reviewed against the place-of-supply rules, the customer’s taxable status and the evidence that the customer is acting as a business. The invoice, contract and VAT number should tell the same story. A foreign customer’s address, payment in dollars and parent-company relationship are useful facts, but none of them replaces the territorial analysis. A French customer invoice for a service performed and taxable in France is not transformed into an export merely because the ultimate shareholder is foreign.

Acquisitions and imports are separate risk points. A company under the franchise normally cannot deduct VAT on its ordinary purchases. Yet the franchise does not necessarily remove VAT on imports. Article 291 of the French General Tax Code states that imports of goods are subject to VAT, and the administrative guidance explains that a franchised business may have to declare import VAT without obtaining a deduction while it remains under the franchise. An EORI number is the customs identification number used in the EU customs system; it is not the same as a French VAT number. The finance team should not treat EORI activation as proof that the company has exited the franchise.

For intra-EU acquisitions, the €10,000 threshold and the rules for opting to tax acquisitions may create a VAT identification obligation even while domestic sales remain under the franchise. Article 286 ter of the French General Tax Code lists categories of taxpayers and legal persons that must receive an individual VAT identification number, including certain intra-EU acquisitions, imports and services for which the recipient is liable. The number may therefore exist before the company becomes liable for French VAT on all of its domestic sales. The existence of a number is not, by itself, proof that every transaction must carry French VAT.

The same caution applies to the corporate registry. The INPI, the French National Institute of Industrial Property, operates the online Guichet unique for many company formalities. The INPI guidance on modifying a company distinguishes changes notified to the Guichet unique from tax options communicated directly to the French tax administration. A change from the franchise to ordinary VAT generally belongs in the SIE tax file. If the company also changes its legal activity, registered office, name or another entry shown on its registration extract, a separate INPI filing may be required. The greffe is the registry office attached to the competent commercial court; it does not replace the SIE for a VAT notification. BODACC, the Bulletin officiel des annonces civiles et commerciales, publishes specified corporate and insolvency notices; it is not the channel for requesting a VAT number.

Two decisions of the Conseil d’État illustrate why a foreign-owned company must work from taxable turnover and the actual tax status rather than from a gross cash figure. In Conseil d’État, 4 July 2001, no. 220903, the court examined the wording that taxpayers “peuvent se placer” under the franchise at the beginning of an activity and treated the regime as a legal option in the circumstances before it. In Conseil d’État, 13 February 2013, no. 342197, the court held that the relevant comparison used the “chiffre d’affaires hors taxe réalisé”, meaning turnover actually realised before VAT. Those short quotations are not a shortcut around the current thresholds; they explain why the ledger must be built on the legally relevant net amount.

The recent decision Conseil d’État, 1 July 2025, no. 470800 is also a warning about incomplete declarations. The court upheld an analysis that considered “l’intégralité de son chiffre d’affaires” in determining whether the taxpayer could rely on the franchise, in a case involving reassessed VAT and a failure to file the required returns. The decision concerned an individual teaching business, not a foreign-owned company, so it should not be presented as a special rule for subsidiaries. Its practical lesson is broader: keep one reconciled turnover file covering every taxable activity, including amounts that a founder or parent company may have tracked outside the French accounting system.

For a second official cross-check, compare the French Tax Administration’s VAT guidance with the Service Public explanation of the French VAT franchise. These sources distinguish the exemption from ordinary VAT, identify the threshold bands and explain why an invoice without VAT cannot be used to recover input tax.

II. What should a foreign-owned company do after exceeding the threshold?

A. How should it identify the effective date and correct its invoices?

The first action is to establish a dated VAT bridge. Take the general ledger, sales ledger, credit notes, deposits, invoices issued, invoices still in draft, e-commerce reports and intercompany records. Reconcile them to the accounting turnover before VAT. Then classify each line as goods, accommodation, service, exempt operation, reverse-charge operation, import or disposal of an investment asset. Article 293 D excludes certain disposals of tangible or intangible investment assets from the calculation and includes specified categories of operations. A spreadsheet that contains only bank receipts cannot reliably identify the crossing date.

The second action is to decide which legal event occurred. There are three common situations:

• The previous-year turnover exceeded the base threshold but stayed within the increased threshold. The company normally prepares for VAT from 1 January of the current year or the following year according to the applicable reference year and the official notice.
• The current-year turnover exceeded the increased threshold. The franchise ends for taxable operations from the date of that excess. The invoice and service-delivery timeline must identify that date.
• The company voluntarily opted for VAT while still eligible for the franchise. The effective date comes from the option and not from a later estimate of turnover.

Take a consulting example. On 2 October 2026, an SAS has completed services that bring its French service turnover to €41,300. The amount crosses the €41,250 increased threshold. The team should record the invoice or service event that brought the cumulative total above €41,250, identify the taxable operations from the legally relevant date, and notify the SIE. If the business had already invoiced a customer after that date using the franchise wording, the customer-facing correction must be prepared without deleting the original document.

Before the date of mandatory exit, the franchise invoice must not show VAT. Article 293 E of the French General Tax Code states that a franchised taxpayer cannot deduct VAT on goods and services used for those operations or show VAT on its invoices. The invoice must carry the statutory wording TVA non applicable, article 293 B du CGI. “CGI” means Code général des impôts, the French General Tax Code. Once the company is liable for VAT, that wording must not remain on an invoice for a taxable operation simply because the accounting software has not yet been updated.

For an invoice issued after the effective date without VAT, the clean correction normally involves an explanatory credit note or cancellation document linked to the original invoice, followed by a replacement invoice showing the taxable base, VAT rate, VAT amount and total. The exact commercial treatment depends on whether the agreed price was stated as net of tax or as a fixed all-inclusive price. A foreign founder should not assume that the customer automatically owes an additional 20 percent. The contract, price clause, consumer or business status of the customer, and the reason for the correction must be reviewed. The tax amount due to the Treasury and the amount recoverable from the customer are connected but not identical questions.

A credit note is not a licence to erase history. Preserve the original invoice, the cancellation reason, the replacement invoice, the date of delivery or completion, the customer’s response and the accounting entry. Number the corrective documents in a continuous series. If the customer has already paid, record whether the VAT amount is collected separately, offset against a future invoice or borne by the company under the contractual price. If the customer refuses the correction, the company still needs to determine what it owes the Treasury and whether a commercial claim or renegotiation is available.

Invoice currency also needs care. Article 289 of the French General Tax Code allows amounts on an invoice to be expressed in a currency other than euros, provided the VAT to be paid or regularised is determined in euros using the statutory conversion mechanism. It also requires the taxpayer to preserve invoice integrity and a duplicate of invoices issued. A USD invoice from a French subsidiary can therefore be corrected, but the accounting file must show the euro VAT calculation and the source of the exchange rate used.

Services require a tax-point review rather than a simple invoice-date review. Article 269 of the French General Tax Code sets different rules for the tax point and the date on which VAT becomes payable, including payment-based rules for many services and specific rules for reverse-charge services. The BOFiP guidance on the loss of the franchise explains that services and goods whose taxable event occurs from the date of the in-year excess are subject to VAT, while an amount collected after that date can relate to a service performed before it. The contract should therefore state the service period, milestones, acceptance, advance payments and any option for VAT on debits.

For a customer who is an EU business, do not replace French VAT with a generic “reverse charge” label without testing the place of supply and the customer’s VAT status. For an import, do not assume that the end of the franchise eliminates import VAT. For an export, keep customs evidence and the documents supporting the zero-rated or exempt treatment. The commercial team should receive a one-page invoice matrix: French B2B, French B2C, EU B2B, EU B2C, non-EU export, non-EU import and intercompany transaction, each with the tax treatment and required evidence.

The loss of the franchise can create a corresponding input-tax opportunity, but it is not an automatic refund of every historical purchase. While under the franchise, the company generally could not deduct VAT for its exempt operations. After becoming liable, deduction depends on the nature of the purchase, its use for taxable operations, the date the right arose and the required supporting invoice. Article 271 of the French General Tax Code provides that VAT charged on elements of the price of a taxable operation is deductible under the statutory conditions and that the right arises when the deductible tax becomes due from the supplier. The first VAT return should contain a separate schedule of current-period input VAT and any permitted starting credit, rather than a blanket claim for all expenses since incorporation.

B. How should it register, file and defend a delayed VAT correction?

Notify the SIE as soon as the company has a documented conclusion. The notification should identify the legal entity, SIREN, registered office, activity, date of commencement, threshold category, turnover calculation, crossing date, expected regime, first affected invoice and the requested VAT identification number or reactivation. SIREN is the nine-digit French business identification number; it is different from the intra-EU VAT number. Use the company’s professional tax account and preserve the message, attachments, acknowledgement and any response. If the account is not activated, create an escalation record showing the attempted contact and the date of the request.

The official tax administration explains that a taxpayer losing the franchise must inform its SIE so that the professional tax file can be updated and VAT declarations and payments can be enabled. A VAT number may be required for taxable French supplies, intra-EU acquisitions, imports or services supplied to a business customer in another member state. Article 286 ter is the legal identification reference for several of those situations. A foreign director can complete the practical process from abroad through a mandate, but the company remains responsible for the accuracy of the filing and the evidence supporting its VAT status.

Once identified as a VAT taxpayer, the company must file the declaration applicable to its regime. Article 287 of the French General Tax Code requires an identified VAT taxpayer to submit a declaration to the competent tax office within the prescribed period and sets the monthly declaration rule for the ordinary real regime. The first return may be a CA3 declaration, the French VAT return form used in many real-regime situations, but the company should follow the regime and filing period shown in its professional tax account rather than assume that every business has the same frequency. CA3 is a form label, not a separate tax regime.

The first return should reconcile four totals: output VAT on affected French taxable supplies, output VAT under applicable reverse-charge rules, deductible input VAT supported by valid invoices, and any import or intra-EU VAT that must be declared. It should be possible to trace each total to a ledger, invoice or customs document. The VAT amount should be calculated from the tax base and rate applicable to the supply, not from the company’s cash balance. If a credit note reduces a prior taxable supply, retain the link between the original output tax and the adjustment.

Late correction should be voluntary and structured. Prepare a chronology with the date on which the base threshold was crossed, the date on which the increased threshold was crossed if applicable, the date of each affected supply, the date of each invoice, the date of the notification to the SIE, the VAT number request, the first return and the payment. Then send the SIE a clear explanation with the corrected turnover schedule and the proposed accounting treatment. A voluntary correction does not guarantee the removal of every sanction, but it gives the administration a usable record and helps distinguish an isolated software delay from a continuing failure to account for VAT.

Interest can arise on tax not paid within the legal period. Article 1727 of the French General Tax Code provides that an unpaid tax claim can generate late-payment interest and states a monthly rate of 0.20 percent in the version applicable before the next recodification. The company should calculate the principal first, then ask the SIE or its tax adviser to confirm the applicable interest, declaration penalties and any good-faith or spontaneous-correction rules. An article on a website cannot safely replace the administration’s calculation for a particular return.

The evidence file should be designed for a foreign management team that may not be familiar with French documents. Include:

• the French registration extract, or Kbis, articles of association and evidence of the start of activity;
• the general ledger, sales ledger and turnover bridge in euros, with the exchange-rate method for foreign-currency invoices;
• the classification of goods, services, mixed activities, exempt operations, reverse-charge supplies, imports and asset disposals;
• contracts, purchase orders, delivery notes, acceptance certificates, timesheets, milestone records and customer correspondence;
• all original invoices, credit notes, replacement invoices, numbering logs and accounting entries;
• the SIE notification, VAT-number request, professional-account messages and any response or refusal;
• EU customer VAT-number checks, reverse-charge evidence, customs declarations and import documents where relevant;
• input-VAT invoices, proof of payment and the schedule supporting any permitted starting credit;
• the board or parent-company approval for the correction, together with the commercial decision on whether VAT is charged to the customer or absorbed under the contract; and
• translations of key foreign documents, with the original version retained and the translator or responsible person identified.

Do not confuse the VAT file with a corporate registry file. The INPI’s Guichet unique is used for a company modification such as a change of activity, registered office or legal information. A tax option or VAT notification may instead be communicated directly to the Direction générale des finances publiques (DGFiP), the French tax administration. The greffe receives and processes many corporate registry filings and can issue information used to obtain a Kbis. BODACC publishes legally prescribed announcements, including some insolvency notices. These French acronyms help a foreign founder navigate the file, but none of them authorises the company to continue charging customers without VAT after the effective date.

During a tax audit, the company should respond to the facts, not merely to the label used by the software. In no. 470800, the Conseil d’État considered the taxpayer’s failure to file returns and the treatment of the whole turnover in the reassessment context. In no. 342197, it focused on turnover before VAT when applying the threshold logic for the year concerned. Those decisions do not eliminate the need to examine the current versions of the Code. They do show why the company should provide the administration with a transaction-level explanation instead of sending a bank statement and asserting that the parent company received the money.

If the SIE rejects the company’s analysis or issues a proposed adjustment, preserve the notice and its date of receipt. Ask for the legal basis, the calculation period, the operations included, the threshold applied, the tax point used and the treatment of input VAT. Compare the administration’s schedule with the company’s own ledger. A response should identify disputed invoices individually and supply the supporting evidence. If a formal claim, administrative appeal or court action is needed, the relevant deadline must be calculated from the notice and the applicable procedural rule. The company should not rely on a generic “30-day” assumption.

The 2026 legislative transition needs its own note in the file. Official guidance states that the provisions are being recodified into the Code of Taxation of Goods and Services and that the new code references begin to operate on 1 September 2026. The current Article 293 B page on Légifrance records the period of application and the forthcoming repeal of the former numbering; the related Article 293 B ter page records the EU small-business notification scheme. When correcting a June or October 2026 invoice, write both the transaction date and the legal reference applicable on that date. Do not retroactively apply a later label to an earlier tax event without checking the transitional provisions.

E-invoicing is another transition, but it is not a substitute for VAT classification. The official tax administration states that the electronic-invoicing reform can concern taxpayers that are subject to VAT even when they benefit from the franchise and do not collect VAT on their domestic invoices. A foreign-owned company should therefore maintain two checklists: one for whether VAT is due on each supply, and another for how the invoice must be issued, received or reported under the electronic-invoicing timetable. A platform rejection does not prove that an invoice is VAT-free, and a successful electronic transmission does not cure an incorrect tax treatment.

Finally, update the group’s controls. Add a monthly threshold dashboard by activity and territory; require finance approval before a salesperson issues the first invoice after a threshold warning; lock the old franchise wording in the billing system when the SIE confirms the effective date; and name one person responsible for the VAT number and professional tax account. The French parent or foreign shareholder should receive the same dated turnover bridge as the local accountant. This reduces the chance that the parent’s consolidation system shows one turnover figure while the French entity’s VAT return shows another.

Conclusion

A foreign-owned French company does not obtain a special VAT threshold. It must apply the French thresholds to the relevant turnover and activity, before VAT, while separating a French subsidiary from a foreign branch and separating domestic taxable supplies from EU reverse-charge, export and import transactions. For 2026, the ordinary figures are €85,000 and €93,500 for goods and accommodation and €37,500 and €41,250 for most services. Exceeding only the base threshold generally affects the following year; exceeding the increased threshold during the year can make VAT due from the date of excess.

The safest response is a dated file: reconcile the turnover, identify the crossing transaction, notify the SIE, obtain or reactivate the VAT number, change the billing settings, correct affected invoices without erasing originals, file the appropriate return and preserve the input-VAT evidence. Use the Kbis and INPI records to identify the legal entity, but use the SIE and DGFiP channels for the tax notification. Account for the September 2026 recodification by recording the rule in force on the date of each transaction. If the amount is material, the customer disputes the extra VAT, the company has mixed activities or the administration has already issued a reassessment, a file-specific review is warranted before the next return and payment deadline.

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