Have you exceeded the thresholds for basic VAT exemption and now wish to return to it? This is a common situation for entrepreneurs whosebusiness fluctuates. Returning to the basic VAT exemption system requires meeting certain strict conditions and following a precise administrative procedure. This guide explains all the steps involved in returning to this advantageous system.

What does it mean to return to VAT exemption?

Returning to basic VAT exemption means regaining the benefit of this system after having been excluded for exceeding the thresholds. Tax and VAT legislation provides for this possibility under certain strict conditions.

This situation frequently arises following an exceptional order, a seasonal peak in business or temporary growth in the company. Returning to franchising is not automatic: it requires active administrative action on your part.

Once you’ve returned, you’ll enjoy the simplicity of the tax-free regime: no more invoicing your customers for VAT, no more deductions on your purchases, and no more periodic VAT returns. The tax authorities generally process such requests within three months.

Conditions for benefiting again from the basic deductible

To return to basic VAT exemption, you must meet the sales thresholds for a full calendar year. This condition is non-negotiable and constitutes the fundamental prerequisite.

Your sales for the previous year must be less than €36,800 for services and €91,900 for commercial activities. These amounts are exclusive of tax. The tax authorities also apply higher tolerance thresholds: €46,300 for services and €101,000 for trade.

The eligibility rule is precise: you can apply to return to the franchise if your sales did not exceed the basic thresholds during the previous calendar year, even if you had exceeded them the year before. In other words, one year’s compliance with the thresholds is sufficient to become eligible again, whatever your previous situation.

For mixed activities, the calculation is made on a pro rata basis. For example, if you generate €20,000 in sales and €25,000 in services, your ratio will be: (20,000/91,900) + (25,000/36,800) = 0.90. You remain eligible if this ratio remains below 1.

Beware of specific VAT questions that may complicate your situation. These special calculations require a precise analysis of your business structure.

The administrative procedure for returning to the franchise

The request to revert to the basic exemption is made when you file your annual VAT return. Depending on your tax regime, you’ll need to use form CA12 for micro-businesses, or form CA3 for actual businesses. You can also do this online via your professional space on the French tax authorities’ website.

This request must be made before January 31 of the year following the year in which you met the thresholds. After this deadline, you will have to wait until the following year to reformulate your request.

The tax authorities have three months to respond to your request. If no response is received within this period, your request is deemed to have been tacitly accepted. Statistically, around 85% of requests for a return to tax-free status are accepted if the conditions are met.

You must also inform your customers of this change. Your invoices will no longer need to mention VAT from the effective date of the return to the tax-free regime.

The consequences of returning to the basic VAT exemption system

Returning to tax-free status has a number of important consequences for your business. You can no longer charge VAT to your customers, which can represent a significant competitive advantage.

In return, you lose the right to deduct VAT on your business purchases. This loss can be offset by administrative simplification and the elimination of VAT returns.

You must pay VAT on inventories and fixed assets acquired under the actual tax system, unless their unit value is less than €500 excluding VAT. Example: for a computer purchased for €1,200 inc. VAT (€1,000 excl. VAT + €200 VAT) and depreciated over 3 years, if you return to the tax-free regime after 1 year of use, you will have to repay €133 VAT (€200 × 2 years remaining ÷ 3 years). This prorata temporis calculation applies according to the remaining amortization period.

This change also impacts your accounting and reporting obligations. You need to adapt your invoicing procedures and inform your accountant of this change of regime.

The words “TVA non applicable, article 293 B du CGI” must appear on all your invoices. This legal obligation protects your customers and avoids VAT audits linked to incorrect invoicing.

Mistakes to avoid when returning to franchising

The first mistake is to request a return to the deductible without scrupulously respecting the thresholds. Exceeding the threshold, however slight, will render your request inadmissible.

Don’t neglect to calculate the VAT to be paid on your fixed assets. This obligation can represent a substantial sum, depending on your professional equipment.

Avoid continuing to charge VAT after your application has been accepted. This error exposes your company to tax penalties and complications with your customers.

Poor management of outstanding receivables can also be a problem. Invoices issued before the return to tax-free status are still subject to specific tax rules, including VAT on bad debts if necessary. To avoid these pitfalls, the support of a tax lawyer guarantees respect for professional secrecy and a secure approach to your case.

Optimize your tax strategy

Returning to the basic VAT exemption is part of an overall tax strategy. It’s a decision that needs to be carefully considered in the light of your business and development prospects, particularly if you manage a complex business portfolio.

Analyze the impact on your cash flow and competitiveness. Basic franchising can enable you to offer more attractive prices while simplifying your private and administrative management.

Anticipate the medium-term consequences. If you are planning rapid growth, the return to franchising may be temporary and generate additional administrative costs. A global approach to wealth management with a wealth lawyer may be a good idea.

The support of a specialist in tax litigation guarantees you a personalized approach that complies with current regulations. This expertise avoids costly mistakes and optimizes your tax situation.