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When part of your income falls outside VAT, your deduction rights and your payroll tax have to be calculated, then recalculated every year. We calculate them for you or with your teams, check what can be improved and secure the whole.
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Banks, insurers, holding companies, healthcare institutions, property companies, training organizations, associations: as soon as part of your business falls outside VAT, two mechanisms come into play.
The two calculations follow different rules: what is correct for one is not necessarily correct for the other. That is where errors arise, to the detriment of the business as well as the tax authorities.
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The deductible VAT on an expense equals the VAT charged on it multiplied by the product of three coefficients: liability (assujettissement, the share of use within the scope of VAT), taxation (the share giving rise to a right of deduction) and admission (statutory exclusions). The result is rounded up to the second decimal place.
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The coefficients applied during the year are provisional. They are finalized before April 25 of the following year, triggering an adjustment. For capital assets, the initial deduction is then adjusted every year for 5 years for movable property and 20 years for buildings, whenever the coefficient varies by more than one tenth (Article 207 of Annex II to the FTC).
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The tax base is the remuneration paid, multiplied by the ratio between turnover not subject to VAT and total turnover for the previous year. This ratio is independent of the VAT coefficient: dividends are included in its numerator, even though they do not reduce the deduction rights of a holding company involved in the management of its subsidiaries. Conversely, the Conseil d'État has ruled that debt waivers are not part of the turnover to be taken into account.
Payroll tax applies employee by employee, under a progressive scale of 4.25%, 8.50% and 13.60%, with thresholds revised every year. Unlike VAT, it is not deductible: every point of overstated liability ratio is a definitive cost.
With VAT moving into the Code of taxes on goods and services (Code des impositions sur les biens et services, CIBS) on January 1, 2027, the references for the deduction rules are changing: find them in our FTC-CIBS concordance table.
Your deduction rights and your payroll tax rely on the same breakdown of your income and costs. We calculate them every year and, in doing so, identify what can be improved.
We determine your liability, taxation and admission coefficients, your provisional and then final coefficients before April 25, the adjustments on capital assets and your payroll tax liability ratio.
For the years still open to audit, we check the calculations applied, the allocation of expenses and the merits of separate business sectors, quantify the VAT to be recovered and the tax overpaid, then prepare the claims.
We provide you with a documented calculation method that can be reused from one year to the next, and assist you in the event of an audit on either tax.
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A business that carries out both transactions within the scope of VAT and out-of-scope transactions, such as a holding company receiving dividends, has a liability coefficient below 1. A business whose transactions are all within the scope of VAT but partly exempt without a right of deduction, such as a bank or a healthcare institution, has a taxation coefficient below 1.
By multiplying, for each expense, the liability coefficient, the taxation coefficient and the admission coefficient. The taxation coefficient may be determined globally, based on the ratio between turnover giving rise to a right of deduction and total turnover, or per business sector where separate sectors are set up.
The coefficients are first calculated on a provisional basis at the start of the year, generally using the previous year's figures, then finalized before April 25 of the following year. For capital assets, an annual adjustment is due for 5 years (movable property) or 20 years (buildings) if the coefficient varies by more than one tenth from the reference coefficient.
Employers that are not subject to VAT, or that were not subject to VAT on at least 90% of their turnover for the previous year: holding companies, banks, insurers, healthcare institutions, associations, property companies letting unfurnished premises.
It is the ratio between turnover not subject to VAT and total turnover for the year preceding the payment of remuneration. The Conseil d'État holds that dividends must be included (CE, February 14, 2018, No. 410302), but not debt waivers.
Yes, by filing a claim, generally until December 31 of the second year following the omission or the payment. An audit of your deduction rights quantifies the amounts at stake; conversely, we help you correct an error before an audit.