France withdraws VAT Répondant scheme increasing cash flow burden

Sun 12th Aug 2012

From the 1 October 2012, non-resident VAT companies trading in France will no longer be permitted to use the VAT répondant scheme, which helped them reduce their French VAT cash flow risks.  This change follows a ruling by the European Court of Justice that the scheme did not comply with EU VAT rules.

The current scheme, known in France as the Adminstration Tolérance, helped non-resident VAT traders importing into France mitigate the 2006 French VAT regime changes.  These changes meant that non-resident importers into France could no longer register for French VAT or charge VAT on the onward sale if the recipient was a French VAT registered business.  Instead, the reverse charge procedure applied.  This left many importers with a VAT import bill to recover, which meant cash flow delays through an 8th or 13th VAT Directive reclaim for EU or non-EU companies respectively.

To overcome this burden, the French tax authorities permitted importers to bring the goods in on the French VAT number of a special fiscal representative, known as the Répondant, who could then charge output VAT.  This did require the approval of the final customer.

However, following a recent ECJ ruling, the French have been obliged to withdraw this mechanism.  In future, importers will have to revert to VAT recovery through a formal claim in their home country.

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