French input VAT: act before the 31 December 2026 time limit

One month after the first phase of France’s e-invoicing reform came into force, the final quarter of 2026 is a strategic time for finance and accounting teams: not only to prepare for year-end, but also to check that all recoverable French input VAT relating to previous periods has been fully claimed.

Despite the increasing automation of invoice processing, amounts of French input VAT still regularly remain unclaimed due to inappropriate accounting settings, incorrect classification of expenses, incomplete processing of employee expense claims, incorrect allocation of invoices containing different categories of expenditure, or changes to the rules applicable to certain expenses.

However, the right to deduct French VAT is not immediately lost where input VAT has inadvertently been omitted. In 2026, businesses may still, subject to certain conditions, correct previous omissions and recover French input VAT that was not originally claimed.

For French input VAT for which the right to deduct arose in 2024, time is now running out: the adjustment must be made before 31 December 2026.

Unclaimed French input VAT: an additional two-year period

As a general rule, deductible French VAT should be reported on the VAT return relating to the period in which the right to deduct arises.

However, Article 208 of Annex II to the French Tax Code (Code général des impôts) provides an additional period where deductible VAT has been omitted. The VAT may be included on a subsequent return, provided that it is reported separately and that the return is filed before 31 December of the second year following the year in which the omission occurred.

Accordingly, French input VAT for which the right to deduct arose in 2024 and which was not originally claimed may, in principle, still be recovered until 31 December 2026.

Importantly, the date shown on the invoice is not, by itself, decisive. The relevant starting point must be determined by reference to the date on which the right to deduct actually arose, taking into account, in particular, the rules governing when VAT becomes chargeable for the supplier.

This distinction may be particularly relevant for certain supplies of services, advance payments or invoices received at a later date.

Why does recoverable French VAT remain unclaimed?

In practice, omissions do not necessarily relate to routine purchases for which VAT treatment is correctly automated. They are more commonly found in unusual transactions or categories of expenditure requiring a specific VAT analysis.

We regularly identify issues resulting from:

• incorrect accounting or VAT classification of an expense;
• ERP settings that automatically exclude VAT without taking applicable exceptions into account;
• invoices combining several categories of expenditure subject to different VAT recovery rules;
• systematic exclusion of employee expense claims from the VAT recovery process;
• incorrect allocation of a French invoice to a foreign country;
• legislative, regulatory or administrative developments that have not been reflected in the company’s VAT recovery rules;
• an overly broad application of an input VAT deduction restriction.

Recent developments concerning, for example, company vehicles made available to employees or certain advertising expenditure illustrate the importance of regularly reviewing the VAT rules embedded in accounting systems.

The objective is therefore not simply to identify “missing” invoices, but also to detect situations where French VAT has been recorded in the accounts without being deducted, even though it could have been wholly or partially recoverable.

How should French input VAT be adjusted before 31 December 2026?

For businesses filing French CA3 VAT returns, previously omitted input VAT must be reported separately in the relevant field, currently box 21, “Other deductible VAT” (Autre TVA à déduire).

The key requirement is that the VAT return through which the right to deduct is exercised must actually be filed before 31 December 2026.

Businesses filing monthly French VAT returns should therefore ensure that any adjustment is included in a CA3 return filed before that date. In practice, the November VAT return, filed in December, will generally be the final ordinary monthly filing opportunity to secure recovery before year-end.

Businesses authorised to file CA3 returns quarterly need to anticipate the deadline even more carefully: as the return for the fourth quarter of 2026 will only be filed in 2027, it will be submitted after the time limit applicable to French input VAT omitted in 2024. The adjustment must therefore be arranged before 31 December 2026.

Particular attention is also required for businesses still subject in 2026 to the French simplified VAT regime and filing an annual VAT return. As the annual return relating to 2026 may, depending on the circumstances, only be filed in 2027, businesses cannot wait until their normal annual filing deadline to deal with 2024 input VAT reaching the 31 December 2026 time limit. An appropriate adjustment must therefore be made before that date.

The final year of France’s simplified VAT regime

This year-end review also takes place against the backdrop of significant changes to French VAT reporting requirements.

From 1 January 2027, the simplified VAT regime will be abolished, except for the simplified agricultural regime. Businesses concerned will move to the standard VAT regime (régime réel normal) and will file CA3 VAT returns.

Quarterly filing will apply where turnover, together with taxable acquisitions taken into account for the purposes of the regime, does not exceed €1 million for the preceding calendar year and €1.1 million for the current calendar year. Businesses will nevertheless be able to opt for monthly filing.

Transitional provisions apply to businesses whose financial year does not coincide with the calendar year: the move to the new regime will take effect at the end of the financial year that includes 31 December 2026.

This change provides a further reason to use the end of 2026 to review French VAT processes and clear any outstanding input VAT omissions relating to previous periods.

Do not confuse omitted input VAT with incorrectly charged French VAT

A French input VAT review should also identify amounts that cannot simply be recovered by deducting them through the VAT return.

French VAT that has been incorrectly charged — for example, where the transaction was not taxable in France or should have been subject to the reverse charge mechanism — does not become deductible merely because it appears on a supplier invoice.

In such cases, the priority is to determine the correct VAT treatment of the transaction and, where appropriate, request that the supplier issue a corrective invoice and refund the VAT incorrectly charged.

Conversely, where a supplier validly issues a corrective invoice showing additional VAT, the time limit for exercising the right to deduct must be determined by reference to that corrective invoicing.

A year-end French VAT review can therefore distinguish amounts that can be recovered immediately from those requiring prior action with the supplier.

Turning a French VAT review into a cash recovery opportunity

The 31 December deadline should not be viewed merely as a tax compliance requirement. It also provides an opportunity to carry out a broader review of supplier accounts and invoice-processing procedures.

BtoBnice assists finance and accounting teams with:

• analysis of accounting entries and supplier data;
• identification of omitted French input VAT;
• validation of the VAT treatment applied to the relevant categories of expenditure;
• preparation of supporting documentation for the adjustments made;
• assistance with French VAT return adjustments;
• correction of accounting rules and system settings responsible for recurring omissions.

This analysis can also form part of a broader Profit Recovery review aimed at identifying additional cash recovery opportunities within accounts payable, including duplicate payments, unreceived or unapplied credit notes, billing errors, overpayments and other anomalies identified during the transaction review.

The objective is twofold: to recover amounts that remain available before the applicable time limit expires and to prevent the same cash leakage from recurring in future financial years.

31 December 2026: do not wait until your final VAT return

Businesses processing significant volumes of invoices or employee expenses should start their review now.

Identifying accounting entries, retrieving supporting documents, assessing entitlement to input VAT deduction and documenting adjustments may take several weeks, particularly where data is spread across several entities, establishments or accounting systems.

For French input VAT for which the right to deduct arose in 2024, 31 December 2026 is the key date: once this deadline has passed, the ordinary adjustment mechanism available for omitted input VAT will no longer be available under the standard rules.

BtoBnice assists businesses in identifying, securing and recovering omitted French input VAT, as well as with broader cash flow optimisation projects.

Contact our experts: contact@btobnice.com