Anticipated tax revolution: creation of a VAT group regime

Anticipated tax revolution: creation of a VAT group regime applicable on option from January 1, 2023

Groups wishing to opt for this new regime have 18 months to assess its advantages and disadvantages and prepare for this new organization.

France is following the European trend by acquiring its own own VAT group regime : a real tax revolution introduced by article 162 of the finance law for 2021, which transposes article 11 of the VAT directive.

Until now, only large groups reporting to the General Directorate of Enterprises could benefit from centralization, at the group head level, of the payment of VAT due by the companies of the group.

The new regime, codified in a new article 256 C of the CGI, goes much further by making it possible to constitute a single taxable person: the VAT group.

All the economic transactions carried out between the members of the group of the same sector of activity will be neutralized with regard to the VAT.

CONDITIONS OF CONSTITUTION AND DURATION

The option of creating a VAT group is offered to taxable persons:

• having in France the seat of their economic activity or a stable establishment,
• being closelyrelated on the plans:
• financial : control of more than 50% of the capital or voting rights (and “presumptions of financial links” will also be provided for in order to allow non-capital-intensive entities to be able to choose),
• economic : main activity of the same nature, interdependent, complementary activities, pursuing a common economic objective or for the benefit of the other members,
• and the organization : subject to joint management or whose activities are organized in consultation.

The option for the group plan must be made by the representative and with the agreement of the members before October 31 of the year preceding its application. For the plan to apply on January 1, 2023, the option must therefore be exercised by October 31, 2022 at the latest.

This option necessarily covers the three calendar years during which the perimeter is in principle fixed:

	During the mandatory three-year period	At the end of the mandatory three-year period
Entry of a new member at 1er January following the year in which the option was made	Taxable person who did not meet the link conditions at the time of the option	Taxable person who meets the link conditions at the time of the option
Exit of a new member	Taxable person who no longer fulfills the link conditions Exit on the 1st day of month following the one during which he no longer fulfills the conditions	Free outing on January 1st of year following that of the decision to leave the group

EFFECTS

Transactions carried out between members of the group become internal and non-impacting operations in matters of VAT.

The single taxable person subscribes alone and monthly the VAT returns in respect of transactions carried out by all members with third parties. Members are no longer liable, so that they no longer have VAT reporting obligations. They nevertheless remain bound to respect their accounting obligations and remain jointly and severally liable for the payment of the tax and any default interest, penalties, surcharges and other fines up to the rights for which they would be liable if they were not members of the group. .

Each member will constitute a sector of activity of the TVA group. Therefore, the right to deduct will operate separately depending on whether the expenses are specific to each member or whether they are used for the group or for several of its members:

• Each member will be able to deduct his clean operations carried out with third parties under the conditions of common law,
• The operations carried out with third parties serving the whole group or multiple members will be assigned and taxed at a flat rate depending on whether they are used by the group or by several members.

If you have a tax audit, the checks will be carried out with the single taxable person who holds the accounts relating to the group's operations. The members of the group will remain subject to tax audit as if they were not members of the group with regard to their transactions with third parties.

Group members will have to calculate the VAT that would have been applied to them if they had not been a member of the VAT group for the purposes of their other taxes and duties. This will be the case in particular with regard to payroll tax : internal group transactions must be taken into account, for the tax liability report, depending on the VAT regime that would have been applicable to them in the absence of group membership. In practice, this device should allow groups of companies in the banking, financial or insurance sectors to see their payroll taxes decrease significantly.

Many details will be provided in the coming months by the tax administration in order to allow companies wishing to opt for this VAT group regime to assess its impact, particularly on organizational and financial plans, and to make an informed decision.