French Budget introduce new VAT measures

Modification of the Small Business Scheme

From 1 March 2025, the threshold for the Small Business Scheme to apply will be set at EUR25,000 for all businesses, replacing the current thresholds of EUR85,000 for supplies of goods and EUR37,500 for supplies of services. This change will require many small businesses to start applying VAT. Clarifications from the tax administration are expected, and the measure is temporarily suspended pending consultations.

VAT group and impact on payroll tax

Salaries paid by employers in a VAT group will be exempt from payroll tax if the employer would not be subject to this tax outside the group and if at least 90% of their turnover gives right to VAT recovery. This applies to salaries paid from 1 January 2026.

Modification of the VAT reporting regime

The simplified VAT regime will be abolished from 1 January 2027, and annual filing will be replaced with a quarterly filing to simplify obligations and improve VAT collection monitoring.

Key takeaway

Businesses, and in particular smaller ones, must start preparing for the changes described above as their compliance and VAT payment obligations are likely to be impacted.