French VAT increase on 1 January 2014… who pays what ?

The Amending Finance Law n° 2012-1510 (article 68) of 29 December 2012 provides for an increase in french VAT rates on 1 January 2014.

TVA-369x300Almost all rates will change

  • The intermediate rate of 7% goes up to 10%.
  • The standard rate of 19.6% rises to 20%.
  • The reduced rate of 5.5% changes to 5% (see summary on the Service Public.fr website).
  • The reduced rate of 2.1% (for certain products and services) stays the same.

As far as services are concerned, the date of payment/collection will determine which VAT rate is applicable:

  • If payment/collection occurs in 2013, the 2013 VAT rate applies;
  • If payment/collection occurs in 2014, the 2014 VAT rate will apply (even if the invoice was issued in 2013).

What impact will it have for everyone involved in a conference?

1 – For learning societies and professional associations…

A change in VAT rates will have no impact on the outcome of a conference if the entire conference is subject to VAT.

20% VAT instead of the current 19.6% will apply to:

  • registrations for conferences organised in France
  • as well as exhibition sales/sponsoring (selling of space-only stands regardless of the nationality of the exhibitor, and selling of stands + associated services for French exhibitors).

2 – For partners…

The date of payment determines which VAT rate is applicable: if an invoice is issued in 2013 but not paid until 2014, a new invoice will be issued indicating the VAT rate applicable in 2014.

3 – For congress attendees who do not recover VAT

Case 1: The association decides to pass the VAT increase on to the congress attendees by increasing the price of registration including tax. Result: no impact on the revenue from conference registrations.

Case 2: The association decides to absorb the VAT increase by reducing the registration fees before tax. Result: reduced income from conference registrations.

Simulation

Prior to 1 January 2014
After 1 January 2014
Excl. tax VAT Incl. tax Excl. tax VAT Incl. tax
Case 1 167.22 32.78 200.00 167.22 33.44 200.66
Case 2 167.22 32.78 200.00 166.66 33.44 200.00

What impact will it have for associations under French law?

All subscriptions from previous years not paid before 1 January 2014 will be subject to the 2014 VAT rate.

The same principle therefore applies to conferences:

Case 1: Either the association decides to pass the VAT increase on to the member by putting up the price of the subscription fee including tax. Result: no impact on the association’s revenue.

Case 2: Or the association decides to absorb the VAT increase by reducing the subscription fee before tax. Result: the association’s revenue goes down.

Regarding publication services (such as magazine subscriptions), the date when the subscription is paid will again determine whether or not the new VAT rate will apply to the subscriber.

Note that if the subscription to a magazine or another publication is subject to a VAT rate of:

  • 2.1 % (for instance a publication by a medium that has a CPPAP number): the rate stays the same
  • 5.5% (publication that corresponds to the definition of a book): the rate drops to 5%
  • 19.6% (any other publication): the rate goes up to 20%

Our advice

  • Speed up or defer invoices for November or December 2013 (payment within 60 days) when possible.
  • Inform partners when issuing invoices in 2013 that rates are about to change.
  • Draw partners’ attention to the need to amend invoices issued in 2013 if they are not paid before 2014. For clients who do not recover VAT (public authorities, non-profit associations, etc.), this rate increase will imply a price rise.
  • Avoid consenting to payments by instalment over the period in which rates are changing: breaking up payments in this way will only complicate invoicing terms.
  • If payment is made in instalments, issue a partial invoice for each down-payment.
Further details

Article published 27 September 2013

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