Tax Litigation, VAT

Intra-community VAT reassessment and defence

Since 1 January 2020, following the entry into force of the 'quick fixes' from Directive (EU) 2018/1910, the exemption for intra-community supplies under Article 262 ter, Section I of the French Tax Code (CGI) rests on substantive conditions: actual transport of goods to another Member State, the buyer's status as a taxable person, communication to the supplier of a valid VAT identification number, and filing of a compliant recapitulative statement. A single missing link and the French tax authority claims 20% French VAT on the entire transaction flow, combined with default interest and frequently a 40% penalty surcharge. Over several years of intra-EU export turnover, reassessments routinely reach hundreds of thousands, sometimes millions of euros. The firm defends businesses at every stage, from audit through to the French Administrative Court of Cassation.

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Issue
French 20% VAT reclaimed on supplies improperly exempted, plus default interest and 40% penalty if deliberate breach
Key rule
CGI art. 262 ter, Section I: exemption for intra-community supplies subject to substantive conditions since the 2020 quick fixes
Proof
Transport must be demonstrated; presumptions under art. 45 bis of Implementing Regulation (EU) No 282/2011 (two non-contradictory items from independent parties)
Acquisitions
VAT self-assessed in France (CGI art. 256 bis); safe harbour for French VAT number (CGI art. 258 C, II)
E-commerce
Distance sales intra-EU: VAT of consumer's country above EUR 10,000 threshold, reportable via OSS window
- 01

Since 2020, formality has become a matter of substance

For years, Court of Justice of the European Union (CJEU) case law protected good-faith suppliers: in the judgment Euro Tyre BV of 9 February 2017 (C-21/16), the Court held that the buyer's failure to register on the VIES system (the EU VAT Information Exchange System) could not alone destroy the exemption, as the VAT number was merely a formal requirement. Directive (EU) 2018/1910 of 4 December 2018 reversed this logic for supplies made from 1 January 2020 onwards.

From now on, the buyer's communication of a valid VAT number in another Member State and the supplier's filing of a compliant recapitulative statement (Article 289 B of the CGI) are substantive conditions of the exemption under Article 262 ter, Section I of the CGI. The rule offers only one escape if the recapitulative statement is deficient: the supplier must properly justify the failure to the tax authorities.

Tax audit teams have fully absorbed this. Accounting reviews systematically target three points: the validity of each customer's VIES number on each transaction date, the consistency of recapitulative statements with the accounts and VAT returns, and tangible proof of transport outside France. Incomplete supporting evidence suffices to undermine the exemption across entire years of supplies, even if goods genuinely left the territory.

The firm limits the number of engagements to ensure direct involvement by partners on every file, and routinely assesses the merit of intervention before any commitment.

- 02

Reassessment grounds, point by point

01

Exemption refused: Article 262 ter disputes

The most common scenario: the tax authority denies the exemption and reclaims French VAT on all supplies.

  • Buyer's VAT number invalid, deleted or absent from VIES on the transaction date: the substantive condition fails for supplies from 2020 onwards
  • Recapitulative statement not filed or incorrect: exemption is lost unless the supplier proves a properly justified failure to the authorities
  • Anti-fraud clause: exemption is denied where the supplier knew or could not have been unaware that the supposed recipient had no genuine business activity
  • Calculated exposure: on EUR 5 million of improperly exempted supplies, VAT reclaim reaches EUR 1 million, before default interest and penalties
02

Proof of transport: the crux of the matter

Article 45 bis of Implementing Regulation (EU) No 282/2011 establishes presumptions of transport from 2020, demanding in practice.

  • Presumption satisfied where the seller holds two non-contradictory items of evidence (signed CMR consignment note, bill of lading, freight invoice, insurance, official documents) from independent parties, unrelated to each other, to the seller, and to the buyer
  • Collection by the buyer (ex-works sales): additional requirement for a written undertaking from the buyer naming the destination Member State, to be received by the tenth day of the following month
  • The presumption is rebuttable and its absence is not fatal: proof of transport remains free-form, and the authorities must assess all evidence produced by the seller
  • The firm reconstructs evidence files transaction by transaction and contests blanket rejections based on mere documentary gaps
03

Intra-community acquisitions: the forgotten self-assessment

The mirror of the exempted supply: the acquisition is taxable in France in the hands of the buyer (CGI art. 256 bis).

  • The French buyer must self-assess VAT on intra-community acquisitions; omission is a classic reassessment ground, even though the tax would have been deductible under normal rules
  • Safe harbour under Article 258 C, Section II of the CGI: the acquisition is deemed located in France once the buyer has communicated its French VAT number, unless it proves the transaction was subject to VAT in the arrival Member State
  • Risk of double taxation: VAT due in France based on the French number, with no deduction right, in addition to tax paid in the destination country; the base is however reduced by the tax established at destination
  • Recurring issue in triangular transactions and supply chains, where allocation of transport to the correct transaction determines each sale's regime
04

Distance sales and OSS: e-commerce under scrutiny

From 1 July 2021, intra-EU distance sales to consumers are taxable in the consumer's country above a global EUR 10,000 threshold.

  • Single threshold of EUR 10,000 (CGI art. 259 D) assessed globally across all intra-community distance sales and certain services; above that, VAT of the consumer's country applies to every euro
  • The single OSS portal permits reporting and payment of VAT across all Member States via a single return; absent registration, mandatory separate registration in each destination country
  • Typical reassessments: French VAT applied wrongly above the threshold, foreign VAT uncollected, marketplace flows miscategorised
  • For sellers established outside France, French tax authorities reclaim VAT on sales to French consumers over multiple years with penalties
05

Defence arguments: what case law still permits

EU case law closely constrains challenges based on third-party fraud or mere documentary shortfalls.

  • CJEU 27 September 2007, Teleos et al. (C-409/04): the good-faith supplier who presented evidence justifying at first sight the exemption right and took all reasonable steps to avoid participating in fraud cannot be reclaimed against where the documents provided by the customer prove forged
  • The burden of proving knowledge of fraud (that the supplier 'knew or could not have been unaware') lies with the tax authority and is contested piece by piece
  • For transactions before 2020, the Euro Tyre line (C-21/16) remains good law: a purely formal requirement could not then support exemption denial
  • Challenge to the 40% penalty for deliberate breach, often applied mechanically where the failure stems from mere documentary insufficiency
- 03

Our approach

The firm handles all aspects of intra-community VAT litigation: support during accounting audit, reconstruction of transport evidence files, response to the reassessment notice, administrative appeals, contentious claims then proceedings before the Administrative Court, the Administrative Court of Appeal and the Council of State, with, where the stakes justify, a referral to the Court of Justice of the European Union. In advance, the firm audits the intra-EU flows of groups (supplies, acquisitions, triangular transactions, distance sales) to secure the exemption before any audit.

  • CGI art. 262 ter
  • 2020 quick fixes
  • Proof of transport
  • Self-assessment
  • OSS portal
- FAQ

Intra-community VAT: your questions

What are the conditions for exempting an intra-community supply from VAT?

Four cumulative conditions, set out in Article 262 ter, Section I of the CGI (French Tax Code): the goods must be dispatched or transported outside France to another Member State; the buyer must be a taxable person or a non-taxable legal entity identified for VAT in another Member State; the buyer must have communicated to the supplier its VAT number, valid on the transaction date; and finally, the supplier must have filed a compliant recapitulative statement (Article 289 B of the CGI). Since Directive (EU) 2018/1910, effective from 1 January 2020, the last two requirements are substantive conditions: breach suffices to destroy the exemption unless the failure is properly justified by the recapitulative statement.

How do I prove that goods genuinely left France?

Article 45 bis of Implementing Regulation (EU) No 282/2011 establishes a presumption of transport where the seller holds two non-contradictory items of evidence, issued by two independent parties unrelated to each other, to the seller, and to the buyer: signed CMR consignment note, bill of lading, air freight invoice, carrier invoice, transport insurance policy, banking or official documents. Where the buyer collects the goods itself, a written undertaking naming the destination Member State is additionally required. This presumption is not exclusive: proof of transport remains open-ended and the authorities must assess all evidence produced, as recent EU case law has reaffirmed.

Can the tax authority deny exemption if my customer acted in bad faith?

It regularly tries, but case law constrains this approach. Under Teleos from the CJEU (27 September 2007, C-409/04), the good-faith supplier who produced supporting documents establishing prima facie the exemption right and took all reasonable measures to avoid complicity in fraud cannot be reclaimed against where the documents handed over by the customer prove forged. The authorities must prove that the supplier knew or could not have been unaware of the fraud. This largely factual debate is won on file quality: internal customer checks, dated VIES verifications, logistical and financial consistency of flows.

What is the safe harbour under Article 258 C of the CGI?

When an operator acquires goods in another Member State by communicating its French VAT identification number, the intra-community acquisition is deemed located in France (Article 258 C, Section II of the CGI), even if goods never physically entered French territory, unless it proves the transaction was subject to VAT in the arrival Member State. The VAT thus due in France under the safe harbour carries no deduction right, making it a particularly costly reassessment head in transaction chains and triangular flows. The French taxable base is however reduced by the tax regularised in the destination country.

What exposure does a business face from intra-community flow reassessment?

The reclaim covers 20% French VAT on all supplies where exemption is withdrawn, or VAT not self-assessed on acquisitions, plus default interest and, where the authority finds a deliberate breach, a 40% penalty surcharge. Over three years of verified flows, exposure typically exceeds EUR 1 million for a business turning several million euros in intra-EU trade. Where carousel fraud is alleged, add payment solidarity liability, reversal of deduction rights and possible criminal exposure, requiring coordinated defence strategy from reassessment notice receipt.

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