Preparing VAT returns during the lockdown period: a headache?
Although French Public Accounts Minister Darmanin has pointed out that companies are simply collectors of VAT and that the exceptional postponements of tax due dates do not concern VAT (though some adjustments are provided for, see our latest blog articles (VAT news blog link)), preparing a VAT return during the lockdown and telework period can nonetheless be a real obstacle course: have all the “paper” invoices been duly recorded in the accounts? have the links between the different departments (accounts receivable, accounts payable) been made? how to be sure that the VAT return includes all the transactions to be reported?
The French tax administration has taken these practical difficulties into account and is offering companies some practical solutions for the filing of their March VAT returns (to be filed between the 19th and 24th of April, depending on the region).
- Thus, for companies that may be encountering physical obstacles to preparing and filing their VAT returns, it is possible to make use of the tolerance measure provided for paid vacation periods: a mere installment equal to 80% of the estimated March amounts will have to be paid in April, and the March transactions will be aggregated with the April transactions in the April return to be filed in May. Note: if the estimate differs by more than 20 points from the targeted 80% installment, the difference will be subject to late-payment interest (e.g.: if the installment paid represents only 65% of the actual March turnover, then late-payment interest will be owed on the 15% differential);
- Moreover, solely for companies that have experienced a drop in turnover linked to the Covid-19 crisis, it is possible, on an exceptional basis and for the duration of the lockdown, for them to pay a flat-rate installment of VAT as follows:
- flat-rate installment of 80% of the amount reported for February or, if the company already had recourse to an installment payment in the previous month, a flat-rate installment of 80% of the amount reported for January;
- if the company’s activity has ceased since mid-March (total shutdown) or slowed down severely (estimated decrease of 50% or more): flat-rate installment of 50% of the amount reported for February or, if the company already had recourse to an installment payment in the previous month, a flat-rate installment of 50% of the amount reported for January.
These measures are likely to be renewed throughout the entire lockdown period for subsequent VAT returns (while this is certainly the case for companies experiencing a drop in turnover, it has not yet been specified for other companies, but we think that the “paid-vacation tolerance measure” should be extendible month-to-month so long as the lockdown circumstances remain the same); after the lockdown period, it will be necessary to file a regularization return covering all the elements of the period.
Nonetheless, to the extent possible, we strongly recommend continuing to prepare your VAT returns on the basis of the actual monthly transactions, even if the company ultimately decides to pay only a monthly installment.
Indeed, the tax administration has clearly indicated that the implementation of these tolerance measures will be the subject of a posteriori controls.