VAT in France : measures from the 2025 Finance Bill
In the absence of a majority vote for the motion of no confidence submitted this week against the 2025 Finance Bill (PLF 2025), imposed by the French government on February 3, 2024, through the use of Article 49.3, the latest version of the finance bill, established by the joint committee, was definitively adopted on Wednesday, February 5.
Several measures from the PLF 2025 concern value-added tax (VAT):
- VAT Exemption Threshold
- VAT group and Payroll Tax
- Simplified VAT Regime
- VAT on Gas Boilers
- VAT on Gas and Electricity Subscriptions
Find more details in our below article.
VAT Exemption Threshold
Companies with an annual turnover below thresholds set by French law are not liable for VAT on their sales and cannot deduct VAT on their purchases. The actual turnover thresholds for 2025 are:
- €37,500 for service providers and liberal professions (increased to €41,250 for the current year)
- €85,000 for commercial and accommodation activities (increased to €93,500 for the current year)
- €50,000 for lawyers, performing artists, and authors (increased to €55,000 for the current year)
Article 10-I of the PLF 2025 introduces, starting from 01/03/2025, a single turnover threshold of €25,000 for all operations of the previous year, with an increased threshold of €27,500 for the current year. Operators will become liable for VAT as soon as this threshold is exceeded for all subsequent operations.
More than 200,000 small businesses in France could be affected by this measure, increasing their tax obligations. The benefit of input VAT deduction was already accessible to small businesses through voluntary VAT registration.
VAT group and Payroll Tax
Since the implementation of the single taxable person regime in France in 2023 (VAT group), companies opting for this regime could become subject to the payroll tax due to their exempt intra-group transactions.
Originally intended as a simplification and tax advantage for VAT group members, this measure was previously a concern for entities liable for VAT on their external transactions.
Article 10 sexies of the PLF 2025 provides for the exemption of VAT group members from the payroll tax under two conditions:
- The company would not be subject to the payroll tax if it was not part of the VAT group.
- For the calendar year preceding the payment of salaries, the turnover from transactions carried out by the single taxable person that entitles VAT deduction under Article 271 is at least 90% of the total VAT-taxable turnover.
Applicable from January 1, 2026, this measure will allow financially, economically, and organisationally linked companies to benefit from the VAT group regime without being fiscally penalised by the payroll tax.
Simplified VAT Regime
Businesses that do not exceed certain annual turnover thresholds (840K€ for the sale of goods, catering, accommodation, and 254K€ for the sale of services) can currently file a single annual VAT return with two semi-annual installments. Monthly VAT returns are required if these thresholds are exceeded.
Starting from 01/01/2027, the quarterly VAT return will be introduced by Article 10 octies of the 2025 Finance Bill, with the turnover threshold set at 1M€ (1.1M€ for the current year) and no sectoral exclusions. VAT payment and deduction will also be required quarterly.
VAT on Gas Boilers
Article 10-I of the PLF 2025 provides for an increase in the VAT rate from 10% to 20% on boilers capable of using fossil fuels.
The 5.5% VAT rate previously applied to high-efficiency gas boilers (condensing boilers) before 2025 had already been increased to 10% by the decree of December 4, 2024, published in the Official Journal on December 24.
The application of the standard VAT rate will also be extended to cleaning works, as well as landscaping or maintenance works for green spaces, as part of energy renovation works or related services.
These measures will apply from 01/03/2025, with some exceptions.
VAT on Gas and Electricity Subscriptions
Article 7-II of the PLF 2025 provides for an increase in the VAT rate from 5.5% to 20% on gas and electricity subscriptions (related to the Network Tariff Contribution).
Other Measures
- VAT exemption for certain operations related to war victims will be extended to victims of terrorist attacks. (Article 10 nonies)
- Introduction, starting from July 1, 2025, of a simplified clearing regime for goods in the aerospace sector, facilitating imports and the application of the active perfection regime. (Article 10 decies)
- Simplification of administrative obligations for reduced VAT rates, especially for energy renovation works. Rather than a written certificate, the certification can be directly mentioned on the quote or invoice. (Article 10 undecies)
- Application of the reduced VAT rate of 5.5% starting from October 1, 2025, for residential solar installations (power ≤ 9 kWc) under certain conditions: self-consumption, energy efficiency, durability. (Article 10 duodecies)
- Removal of the individual certificate from the publisher for certain tax measures related to cash register software, easing administrative procedures. (Article 10 terdecies)
- The possibility of having a different list of VAT-exempt products between Guadeloupe/Martinique and Réunion until December 31, 2027. (Article 10 sexdecies)
Our VAT experts are at your disposal for any further information: contact@btobnice.com
Source : https://www.assemblee-nationale.fr/dyn/17/textes/l17b0873-n0_rapport-fond
