You live in London, New York, Dubai or Singapore. Your French company — usually a SAS (société par actions simplifiée, a flexible joint-stock company) or a SARL (société à responsabilité limitée, the French limited liability company) — is registered with the RCS (Registre du commerce et des sociétés, the trade register kept by the greffe, the commercial court registry), holds a SIREN number (the nine-digit business identifier) and a SIRET number (SIREN plus five digits identifying each establishment), and has received its Kbis (the official certificate proving the company exists). The first customer asks for an invoice, the first supplier sends one with 20 percent VAT, and the questions start: must your company charge French VAT on its sales, at which rate, when does the exemption for small turnovers apply, and how do you file returns and pay from abroad without triggering penalties? This guide answers those questions step by step, with the exact statutory provisions and two recent court decisions, so that a founder who never sets foot in France can still keep a French company fully VAT-compliant.
French VAT (taxe sur la valeur ajoutée) follows the company, not the residence of its director or shareholders. Once the company performs taxable transactions in France, it enters the VAT system: either inside the franchise en base (the exemption that releases small businesses from charging and paying VAT while also denying them any deduction), or under one of the real VAT regimes, with monthly or quarterly returns, invoices carrying VAT, and a right to deduct the VAT paid on purchases. The companion formation guide of this site (Setting Up a Company in France as a Foreign Founder: Bank Account, Kbis, VAT and Your First Hire) describes the creation sequence; this article takes over where it stops and follows the VAT life of the company, from the first taxable sale to the first return, including the traps that recent case law has confirmed.
I. When your French company becomes liable for French VAT
A. Which sales are taxed, at which rate, and when small turnovers escape the tax entirely
Article 256 of the French General Tax Code (Code général des impôts, the CGI, the consolidated tax statute) provides that supplies of goods and services performed for consideration by a taxable person acting as such are subject to VAT (Article 256 CGI on Légifrance). In practice, nearly every sale your French company makes in France — goods shipped from a French warehouse, services performed for French clients, subscriptions, commissions — falls inside this definition, unless a specific exemption applies. The company’s foreign shareholders and the foreign residence of its president (the dirigeant of a SAS) or gérant (the manager of a SARL) change nothing: liability attaches to the French taxable person, identified by its French intra-Community VAT number issued after registration with the tax authority (the DGFiP, Direction générale des finances publiques).
The standard rate is set by a single short sentence of Article 278 CGI: « Le taux normal de la taxe sur la valeur ajoutée est fixé à 20 %. » (Article 278 CGI on Légifrance). Reduced rates exist for defined sectors — Article 279 CGI, for example, taxes listed services at 10 percent (Article 279 CGI on Légifrance) — but the reduced rate is never a matter the business may choose at will. A Paris Court of Appeal judgment of 2 October 2024 (RG No. 22/14165, Pôle 5, Chambre 4, official record of the decision) illustrates the danger: a franchisee had invoiced all its customers at the 10 percent reduced rate of Article 279 CGI, the tax authority reassessed several years of VAT at 20 percent for a total exceeding 100,000 euros, and the franchisee then sued its franchisor to recover the reassessment, arguing that the network should have warned it. The court confirmed the first judgment in all its dispositions submitted to it and ordered the franchisee to bear the appeal costs plus 8,000 euros under Article 700 of the Code of Civil Procedure. The lesson for a foreign founder is direct: the applicable rate is a legal classification of each service or supply, the reassessment falls on the French company that invoiced, and no contract with a partner, franchisor or adviser transfers the VAT debt to someone else.
Small turnovers may escape VAT altogether through the franchise en base, the exemption scheme described on the official Service Public Entreprendre portal (VAT exemption scheme on Service Public). A company established in France whose turnover for the previous calendar year stays within the statutory ceilings neither charges VAT to its customers nor files VAT returns, but symmetrically it cannot deduct any VAT on its own purchases. For sales of goods, the 2026 figures published by the administration are a basic ceiling of 85,000 euros for the previous year and an increased tolerance ceiling of 93,500 euros for the current year; for services, the figures are 37,500 euros and 41,250 euros respectively, and further specific ceilings apply to defined activities such as certain liberal professions, which must be checked activity by activity (threshold pages by activity on Service Public). The timing rules published on the same portal are strict: a company that exceeds the basic ceiling becomes liable from 1 January of the following year, while a company that exceeds the increased ceiling in the current year becomes liable from the very day of the overrun (timing of loss of the exemption on Service Public). In the year the company starts trading, turnover is adjusted pro rata to the operating period to produce a full-year equivalent before comparison with the ceilings, under the formula published by the administration (first-year pro rata rule on Service Public).
Founders who read older memoranda should update them: the 2025 Finance Act had introduced a single exemption ceiling of 25,000 euros (increased ceiling 27,500 euros) initially scheduled for 1 March 2025, the measure was suspended after consultation with professional federations, and the statute of 3 November 2025 repealed it for good while maintaining the current activity-based ceilings (Service Public news of 5 November 2025). A foreign-held company created in 2026 therefore works with the 85,000 and 37,500 euro basic ceilings, not with the abandoned single ceiling. Crossing a ceiling mid-year has immediate operational consequences: invoices issued from the day of the overrun must carry VAT, the company must register the change with the tax authority, and the prices quoted to customers net of tax suddenly grow by 20 percent unless the contracts anticipated the shift — one more reason to draft customer contracts with a VAT-adjustment clause from day one.
B. When the tax becomes due and who pays it when a party sits outside France
Becoming liable is one thing; knowing the exact moment the tax becomes due is another, because that moment drives cash flow, the return on which the VAT must appear, and the customer’s right to deduct. Article 269 CGI distinguishes the fait générateur (the event giving rise to the tax, typically performance of the supply) from exigibilité (the moment the Treasury can claim the tax) (Article 269 CGI on Légifrance). For supplies of goods, the tax is in principle due when the supply occurs, with amounts received in advance triggering liability up to the sums collected; for services, the same article makes the tax due when the price, the fee or the advance payment is received, unless the supplier has elected to pay VAT on debits, in which case invoicing itself triggers liability (paragraph 2(c) of Article 269 CGI on Légifrance). A consultancy, software or agency business run from abroad therefore owes the VAT on its fees when clients actually pay, not when it sends the invoice — unless it opted for debit-based accounting — while a trading company moving goods owes it on delivery. Deposits and advance payments always accelerate the due date up to the amount collected, a point founders financing operations with large deposits should model in their treasury forecasts.
Cross-border operations add the reverse-charge mechanism of Article 283 CGI, which matters in both directions for a foreign-run company (Article 283 CGI on Légifrance). When a supply or service covered by Article 259 A CGI is performed by a taxable person not established in France, the French customer holding a French VAT number self-assesses the tax and reports it on the return defined by Article 287 CGI; symmetrically, when services listed in Article 259(1) CGI are supplied by a person not established in France, the French recipient pays the tax (Article 283(1) and (2) CGI on Légifrance). Concretely, if your French company buys strategy, design or development services from a provider outside France, your company — not the provider — accounts for French VAT on the purchase through reverse charge, and the same logic applies when your company sells into other Member States under the intra-Community supply rules. Invoices in these chains must reflect the mechanism explicitly, because the customer’s deduction depends on paperwork that matches the reverse-charge treatment.
Three practical consequences follow for companies directed from abroad. First, the calendar of liability does not wait for the founder to understand French: the fait générateur occurs in France whether the director signs from Paris or from another continent. Second, mixed businesses — part goods, part services, part cross-border — apply different due-date rules to each line of revenue, so bookkeeping must tag every invoice by category rather than treating VAT as a single year-end adjustment. Third, electing for debit-based VAT payment is a strategic choice: it aligns the tax with invoicing and simplifies deduction for business customers, but it advances cash outflows for service businesses whose clients pay late, which is precisely the profile of many foreign-founded consultancies and agencies.
II. How a company run from abroad stays compliant in practice
A. Invoices, deduction, and the declaration deadline the Cour de cassation refuses to extend
Every VAT system stands or falls on invoices. Article 289 CGI requires every taxable person to ensure that an invoice is issued, by itself, in its name and on its behalf by its customer, or by a third party, for supplies to another taxable person or to a non-taxable legal person that are not exempt, as well as for advance payments received before those transactions are performed (Article 289 CGI on Légifrance). Commercial law mirrors the duty: Article L.441-9 of the Commercial Code states « Tout achat de produits ou toute prestation de service pour une activité professionnelle fait l’objet d’une facturation. » and requires the seller to deliver the invoice upon performance, the buyer to claim it, and each party to keep a copy within the retention period set by tax law (Article L.441-9 of the Commercial Code on Légifrance). The invoice must identify both parties with addresses, the date of the sale or service, quantities, precise descriptions, unit prices excluding VAT, and any price reductions tied to the transaction. A founder abroad should impose one template, one numbering sequence and one archiving rule on the whole company, because gaps in numbering and missing mentions are the first things auditors examine, and because electronic invoicing obligations progressively make this discipline a condition of operating at all.
Deduction is the economic heart of VAT: the tax charged on sales is offset by the tax borne on purchases, so that only the value added is finally taxed. Article 271(I)(1) CGI states the principle in one sentence: « La taxe sur la valeur ajoutée qui a grevé les éléments du prix d’une opération imposable est déductible de la taxe sur la valeur ajoutée applicable à cette opération. » (Article 271 CGI on Légifrance). The same article adds that the right to deduct arises when the deductible tax becomes due from the liable person, and that deduction is taken by crediting the tax owed for the month in which the right arose (Article 271(I)(2) and (3) CGI on Légifrance). Goods and services must also be used for taxable transactions that themselves open the right to deduct. Three exclusions follow that foreign founders frequently discover too late: a company under the franchise en base deducts nothing; VAT on expenses unrelated to taxable output (private expenditure routed through the company) is not deductible; and VAT without a compliant invoice backing it cannot support a deduction, which returns the argument to the invoicing discipline described above.
The Cour de cassation has now confirmed how unforgiving the declaration timetable is. In a judgment of 1 October 2025 (Commercial, Financial and Economic Chamber, Appeal No. 24-14.456, official record of the decision), the Court ruled, on the combined provisions of Article 271(I) CGI and Articles 208 and 242-0 A to 242-0 G of Annex II to the CGI: « Il résulte de la combinaison de ces textes que le client d’un assujetti, lorsque cet assujetti a opté pour le paiement de la TVA d’après les débits, doit déclarer la TVA déductible figurant sur les factures dans le mois de leur réception et au plus tard le 31 décembre de la deuxième année suivante. A défaut de déclaration dans ces délais, le crédit de TVA ne peut donner lieu ni à imputation ni à remboursement. » The Court accordingly quashed a Paris appeal judgment of 27 February 2024 that had allowed a refund claim filed after payment of the invoices but outside the declaration window, holding that the lower court had violated the cited provisions by reasoning from the refund-request time limits instead of the declaration time limits running from receipt of each invoice (paragraphs 7 and 8 of the judgment). For a company managed from abroad, the message is stark: deductible VAT shown on a supplier invoice must be declared in the return of the month the invoice is received, and at the latest by 31 December of the second following year, failing which the credit is permanently lost — no credit against future VAT, no refund, no second chance through a later claim.
Distance makes this deadline harder, not softer. Mail addressed to the company’s French registered office (siège social) may sit unread while the founder travels; an accountant (expert-comptable) engaged without clear VAT instructions may book invoices late; and a supplier who opted for debit-based VAT changes the starting point of the customer’s clock. The operational answer is a monthly routine that does not depend on anyone’s presence in France: every supplier invoice received in a month is transmitted to the accountant before month-end, the accountant confirms the VAT amounts booked, and the founder reviews the draft return online through the professional area of the impots.gouv.fr portal before it is filed. Companies that let invoices accumulate in a drawer until year-end systematically forfeit part of their deduction rights, exactly as the 2025 cassation case demonstrates.
B. VAT returns, corrections, and the real cost of filing late or wrong
Article 287 CGI organises the return system around two profiles (Article 287 CGI on Légifrance). Companies under the normal real regime file the standard return every month, showing total transactions and taxable detail, and pay the VAT due each month; on request they may be granted one additional month under conditions set by ministerial order, and where the annual VAT due is below 4,000 euros they may file quarterly instead (Article 287(2) CGI on Légifrance). Companies under the simplified regime file one annual return determining the tax for the period, with two advance payments in July and December equal to 55 percent and 40 percent respectively of the previous year’s tax before deduction of VAT on fixed assets, the balance being paid with the annual return (Article 287(3) CGI on Légifrance). New taxable persons may determine their own first-year advances, each of which must represent at least 80 percent of the tax actually due for the corresponding half-year (Article 287(3) CGI on Légifrance). Cessation or transfer of the business triggers a return within thirty days, extended to sixty days under the simplified regime (Article 287(4) CGI on Légifrance). A foreign founder choosing the company’s tax regime at creation — normal or simplified — is therefore choosing its cash-flow rhythm for the whole year: monthly precision with constant visibility, or annual simplicity with two large advances to fund in July and December.
Intra-Community and cross-border lines of the return deserve separate attention. The same Article 287 requires the return to identify, among other items, the total excluding VAT of exempt intra-Community supplies, goods installed or assembled in another Member State, and supplies whose place is outside France under the territoriality rules (Article 287(5) CGI on Légifrance). Companies that make intra-Community acquisitions, imports or movements out of suspensive warehousing regimes must file monthly returns even under the simplified regime, with the first return recapitulating all transactions for which tax became due since the start of the current year (Article 287(3 ter) CGI on Légifrance). In practice, a French e-commerce subsidiary importing stock, a consultancy re-invoicing foreign costs, or a holding with intra-group flows must track these lines from the first month, because the penalties below apply to the return as a whole and the administration cross-checks French returns against the recapitulative statements filed in other Member States.
The price of delay is fixed by statute and scales fast. Article 1728 CGI punishes failure to file a required return within the prescribed time with a surcharge on the duties assessed: 10 percent where no formal notice was sent or where the return is filed within thirty days of receiving a notice to file, 40 percent where it is not filed within those thirty days, and 80 percent where an undisclosed (occulte) activity is discovered (Article 1728 CGI on Légifrance). Article 1729 CGI punishes inaccuracies and omissions affecting the basis or collection of the tax with 40 percent for deliberate failure, 80 percent for abuse of law within the meaning of Article L.64 of the Tax Procedures Book, and 80 percent for fraudulent manoeuvres or concealment of part of a contract price (Article 1729 CGI on Légifrance). A return filed three months late without a notice therefore costs 10 percent of the VAT due on top of the tax itself; the same return filed after ignoring a formal notice costs 40 percent; and figures the administration characterises as deliberate understatements attract 40 percent even when filed on time. Founders sometimes assume that distance or unfamiliarity with French mitigates these surcharges — it does not, and voluntary correction before any audit remains the only reliable way to contain them.
Four habits keep a foreign-run company safe. First, calendarise the regime: know whether the company files monthly or quarterly and who prepares each return, with a named substitute during holidays. Second, reconcile deduction with invoicing every month, because the cassation rule described above makes late-booked supplier invoices a dead loss. Third, isolate cross-border flows — reverse-charge purchases, intra-Community acquisitions, imports — in dedicated ledger accounts so the specific return lines can be evidenced if questioned. Fourth, treat every formal notice (mise en demeure) from the tax authority as a thirty-day countdown, since the surcharge rate under Article 1728 CGI jumps precisely at that threshold (Article 1728(1)(a) and (b) CGI on Légifrance). Companies sold, transferred or closed from abroad must add the thirty-day final return to the closing checklist, alongside the strike-off from the RCS and the publication in the BODACC (Bulletin officiel des annonces civiles et commerciales, the gazette where company births, moves and deaths are published).
Conclusion
A French company directed from abroad enters the VAT system the moment it performs taxable transactions in France: 20 percent is the default rate unless the service or supply demonstrably qualifies for a reduced rate, the franchise en base shelters only turnovers below the published ceilings with loss of all deduction rights as its price, and the single-threshold project is definitively abandoned. Liability then runs on French clocks — performance or payment for the due date, reverse charge where a party sits outside France, monthly declaration of deductible VAT from receipt of each invoice with an absolute stop at 31 December of the second following year — and the returns follow the monthly or annual rhythm of the chosen regime. The two court decisions of 2024 and 2025 confirm that neither contractual arrangements with business partners nor later refund claims repair a wrong rate or a missed declaration window. Organised monthly from anywhere in the world, VAT is a routine; neglected across borders, it becomes a reassessment with surcharges of 10 to 80 percent. The founders who build the routine first invoice their French growth with confidence; the others finance it twice.