Indirect Tax News N°103 – October 2015

Edenred (Conseil d’Etat, 1 October 2015, n°369846) – VAT – Whether “incidental financial supplies” – No

The company Edenred France carried out an activity consisting of the issue and sale of restaurant vouchers. To this end, the company received the full amount corresponding to the face value of the vouchers and invested these sums at a financial establishment. The company made a reclaim arguing that it had wrongly reduced its VAT partial exemption ratio and that the income from the investments should be considered as relating to “incidental financial supplies”.

The Conseil d’Etat upheld the decision of the Court of Appeal of Versailles in confirming that “these transactions, inseparably linked to the activity of issuing and selling restaurant vouchers by constituting not only the direct and permanent extension, but also the necessary extension, neither the fact that they are not required by regulations, nor the fact that they are not necessary for the issuing company to be profitable, being relevant.” Thus, the Conseil d’Etat has further restricted the concept of incidental financial supplies by removing the previously-used criterion of “indispensable complement of the taxable economic activity” (SNC Ariane, Conseil d’Etat, 21 October 2011, n° 315469).

Bayer Cropscience (Conseil d’Etat, 9 October 2015, n° 371794) – VAT – Place of supply – Actual beneficiary

The company Bayer Cropscience concluded an umbrella agreement providing for the granting of rights with The Scotts Company (US) and considered that the place of supply of these services was located outside France. Following an examination of the company’s accounts, the French tax authorities formed the view that the rights granted had been acquired not by The Scotts Company but by its French subsidiary Scotts France Holding SARL, and considered that these supplies of services should be subject to French VAT.

The contract provided, in particular, at point 1, that the company Rhône Poulenc Agro (Bayer Cropscience) had agreed to sell intellectual property specifically to “companies affiliated with Scotts” and that clause 4 of the contract, headed “Payment by purchasing subsidiaries” provided that in consideration for the access rights that were granted to them, the “purchase subsidiaries” agreed to pay the corresponding price.

No invoices had been raised by the companies in the furtherance of the contract and the French subsidiary had included the intellectual property as an asset on its balance sheet and had paid part of the price directly.

The Conseil d’Etat upheld the decision of the Court of Appeal in holding “that the company Scotts France Holding SARL was the actual beneficiary of a part of the rights granted by the company Rhône-Poulenc Agro, for which it paid the price to that latter as stipulated in the concession contract […] and that the place of supply of this service was, therefore, in France.” The concept of “actual beneficiary” was analysed for the first time by the Conseil d’Etat. If the use of this concept of actual beneficiary should be confirmed, this position should be validated with the position of the CJEU concerning advertising services in the Design Concept SA case (CJEU, 5 June 2013, case C-438/01). Furthermore, such a decision casts uncertainty on the transactions.

VAT Committee, 20 October 2015 – Publication of new VAT Committee guidelines resulting from the meetings of 30 March 2015, 20 April 2015 and 4-5 June 2015

Electronic VAT payments: new developments

Since 28 October 2015, the bank account format authorised to make electronic VAT payments is the European format SEPA B to B. Businesses which are already registered at to make VAT payments have, in principle, no particular action to take, as the French tax authorities have automatically updated the data that they held. However, it is recommended that businesses check the information updated by the French tax authorities on 28 October 2015.

From 1 December 2015, it will be possible to use a foreign bank account if it complies with the format SEPA B to B. Foreign businesses which have a bank account of this type will be required, as a result, to pay their VAT electronically from 1 December 2015 and to carry out the necessary procedures on the website.

Finance Bill 2016

Distance sales (Art 3): reduction from €100,000 (VAT-exclusive) to €35,000 (VAT-exclusive) of the threshold for triggering VAT taxation in France with the desire of MPs to extend this provision to groups of operators and to distributors.

Fight against concealment of takings for VAT purposes (Art 38): to fight against a type of fraud consisting of using permissive till software or systems allowing the hiding of a part of the takings, a legal obligation will be brought in by 1 January 2018 to use a secure system or software. This obligation will take the form of the presentation of a certificate of approval by a third party authorized to carry out audits of “certification of a high level of security” or by the presentation of an individual certificate provided by the publisher of the software. In the event of a spot-check, non-compliant businesses would face a fine of €5,000 and would be required to come into compliance within 60 days.

This bill is currently going through the legislative process and could yet be amended.

French Income Tax Withholding: Are you Ready?

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