Oracle Fusion/eBTax – FR VAT – French VAT considerations

Oracle Fusion/e-Business Tax – French VAT Considerations

If anyone says that European vat is harmonised, then they are wrong! Whilst those countries in the euro zone adhere to similar principles with the core tax rules being the same, most European countries will have specific tax legislation of their own, often required purely for statistical reporting but nearly always forming part of the countries localisation requirements.

Whilst French vat itself has few localisation, certainly around tax, they do have additional requirements. At eBiz Answers, we have a fully tried and tested fully automated indirect tax solution where along with the common tax rate names, STANDARD, EXEMPT etc., we also need to report the VAT separately for the following events;

  • Purchase of assets
  • 80% recovery rates
  • Purchase and sales to Monica
  • Sales to the French territories

And depending on the client, you may also be required to defer you VAT too.

In my opinion, the tax solution should be designed around how you need to report the tax. It is a lot easier to recorded at source the fact that your vat is linked to an asset and report it separately as you can easily add it to the standard rate amounts for the vat submission. But if you had not done this then at the end of the years, you will have to find a way to go through all your transactions for asset purchases and then try and work out an amount which is going to take a lot longer to do that reporting it correctly first time.

Oracle themselves may argue that tax reporting codes should be used and I would agree but for the fact that the reporting codes are not visible anywhere in reports or when the transaction has been calculated so how then will the user know that a tax rate is actually a service item or an asset purchase unless we have an individual tax rate for the purpose?

There is also another common situation I. France where a French company exports a lot more of its product than selling locally but purchases the raw materials locally. In this situation, the suppliers would be charging vat for our French company to recover but because they are exporting, do VAT is being generated. In this situation, known as ‘Non-Dom’, an exemption certificate is often sought and then provided to the suppliers to stop the VAT from being levied. I would advise against using a tax exception, commonly adopted by a US tax solution and instead manage your exemptions by tax rules. To do this, create a party classification code (Exempt) via the trading community manager and then associate this classification with your FR VAT tax regime for France. Assign the ‘Exempt’ party classification code to your supplier or even better if you want all your supplier to be exempt, assign the party classification code to the legal entity establishment that is making the purchase. Create a tax rule that calls either the EXEMPT OR NON-DOM tax rate for these domestic purchases.

If anyone has any other French vat requirements that they would like to share, please add as a comment.