{"id":2110476,"date":"2026-08-27T21:10:35","date_gmt":"2026-08-27T19:10:35","guid":{"rendered":"https:\/\/kohenavocats.fr\/2026\/08\/27\/french-vat-threshold-exceeded-foreign-owned-company-next-invoice-2026\/"},"modified":"2026-08-27T21:10:35","modified_gmt":"2026-08-27T19:10:35","slug":"french-vat-threshold-exceeded-foreign-owned-company-next-invoice-2026","status":"publish","type":"post","link":"https:\/\/kohenavocats.fr\/en\/2026\/08\/27\/french-vat-threshold-exceeded-foreign-owned-company-next-invoice-2026\/","title":{"rendered":"French VAT Threshold Exceeded by a Foreign-Owned Company: What to Do Before the Next Invoice"},"content":{"rendered":"

A French company owned by a foreign parent can move from the VAT exemption known as the franchise en base de TVA<\/em> 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.<\/p>\n

This question belongs to the wider French company formation and compliance hub<\/a> for international businesses operating in France.<\/p>\n

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 \u20ac85,000\/\u20ac93,500 for goods and accommodation and \u20ac37,500\/\u20ac41,250 for services; the proposed \u20ac25,000 threshold is not in force. The Code recodification scheduled for 1 September 2026 may change references, not the liability date.<\/p>\n

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 imp\u00f4ts des entreprises<\/em> (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.<\/p>\n

I. What VAT threshold applies to a foreign-owned company in France?<\/h2>\n

A. Which French turnover and activity thresholds trigger VAT?<\/h3>\n

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.<\/p>\n

At the date of this article, Article 293 B of the French General Tax Code<\/a> provides the central thresholds. For the ordinary activities of a company, the two figures operate as follows:<\/p>\n\n\n\n\n\n\n\n
Activity<\/th>\nBase threshold for the previous year<\/th>\nIn-year increased threshold<\/th>\nConsequence<\/th>\n<\/tr>\n<\/thead>\n
Goods, on-site sales and accommodation<\/td>\n\u20ac85,000<\/td>\n\u20ac93,500<\/td>\nBase threshold usually affects 1 January of the following year; the increased threshold causes an in-year exit on the date it is exceeded.<\/td>\n<\/tr>\n
Most services and liberal activities other than the special professions<\/td>\n\u20ac37,500<\/td>\n\u20ac41,250<\/td>\nBase threshold usually affects 1 January of the following year; the increased threshold causes an in-year exit on the date it is exceeded.<\/td>\n<\/tr>\n
Regulated legal activity, qualifying authors and artists<\/td>\n\u20ac50,000 or \u20ac35,000 depending on the activity<\/td>\n\u20ac55,000 or \u20ac38,500 depending on the activity<\/td>\nUse the special table only when the activity falls within the statutory categories.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

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<\/a>. 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.<\/p>\n

The two thresholds do not create a simple \u201csafe zone\u201d 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 \u20ac37,500 but remains at or below \u20ac41,250 can remain under the franchise for the year, while an excess of \u20ac41,250 creates an in-year liability from the day of excess.<\/p>\n

For example, imagine a French software consultancy owned by an English parent. Its French turnover reaches \u20ac39,000 on 15 June 2026 and \u20ac41,300 on 3 October 2026. The first figure exceeds the \u20ac37,500 base threshold but not the increased threshold. The second figure crosses \u20ac41,250. 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.<\/p>\n

Goods and accommodation follow the same logic with \u20ac85,000 and \u20ac93,500. A trading subsidiary that reaches \u20ac86,000 in 2026 but never exceeds \u20ac93,500 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 \u20ac93,600 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.<\/p>\n

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.<\/p>\n

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\u2019s registration details; it is evidence of registration, not a substitute for the VAT activity timeline.<\/p>\n

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<\/a> 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.<\/p>\n

B. Does foreign ownership, a branch or an EU customer change the calculation?<\/h3>\n

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.<\/p>\n

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<\/a> 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\u2019s threshold analysis.<\/p>\n

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<\/a> 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 \u201creverse charge\u201d merely because the customer is foreign.<\/p>\n

For a French business providing services to a foreign group company, the transaction should be reviewed against the place-of-supply rules, the customer\u2019s 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\u2019s 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.<\/p>\n

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<\/a> 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.<\/p>\n

For intra-EU acquisitions, the \u20ac10,000 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<\/a> 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.<\/p>\n

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<\/a> 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.<\/p>\n

Two decisions of the Conseil d\u2019\u00c9tat 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\u2019\u00c9tat, 4 July 2001, no. 220903<\/a>, the court examined the wording that taxpayers \u201cpeuvent se placer<\/q>\u201d 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\u2019\u00c9tat, 13 February 2013, no. 342197<\/a>, the court held that the relevant comparison used the \u201cchiffre d’affaires hors taxe r\u00e9alis\u00e9<\/q>\u201d, 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.<\/p>\n

The recent decision Conseil d\u2019\u00c9tat, 1 July 2025, no. 470800<\/a> is also a warning about incomplete declarations. The court upheld an analysis that considered \u201cl’int\u00e9gralit\u00e9 de son chiffre d’affaires<\/q>\u201d 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.<\/p>\n

For a second official cross-check, compare the French Tax Administration’s VAT guidance<\/a> with the Service Public explanation of the French VAT franchise<\/a>. 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.<\/p>\n

II. What should a foreign-owned company do after exceeding the threshold?<\/h2>\n

A. How should it identify the effective date and correct its invoices?<\/h3>\n

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.<\/p>\n

The second action is to decide which legal event occurred. There are three common situations:<\/p>\n