VAT and France

The general VAT rule for goods is that the physical movement of the goods between countries is more important than the legal ownership of them. So, for example:

• the transfer of stock by a business from a warehouse that it owns in France to the UK will normally be classed as a UK import; and
• a delivery of goods by a French business to the French warehouse of a UK business will not automatically be classed as a UK import.

It follows that where a UK business transfers any of its stock or assets from France to the UK, it is treated in the same way as other imports from France to the UK. The business also becomes the receiving customer in the UK. This means:

• If the business is registered for French TVA and UK VAT, the transfer of the goods can be zero-rated for French TVA purposes as long as the business obtains and keeps the usual documentary proof of export.
• If the business is registered for French TVA and UK VAT, it must account for VAT on the import by including it in box 2 of its regular UK VAT return, at the appropriate UK VAT rate (it may be at the standard rate, zero-rated or exempt in the UK). It may then reclaim that same amount by including it as input VAT in box 4 of the same VAT return, subject to the normal rules about recovering input VAT.
• If the business is registered for UK VAT but not for French TVA, it need not account for UK VAT on the import in this way.
• If exceptionally the UK business is registered for French TVA but not for UK VAT, TVA must usually be charged and paid at the rate applicable to a normal sale in France.

One effect of these rules is to prevent a UK business with branches around Europe from being able to gain an unfair tax advantage by purchasing goods in the EC country with the lowest rate of VAT before transferring them tax-free to the UK.

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