Ordinance No. 2025-1247 of 17 December 2025 on the re-codification of VAT was published in the Official Journal of 20 December 2025.
The authority has placed VAT legislation under Book II of the French Goods and Services Tax Code (Code des impositions sur les biens et services – CIBS). In so doing it has end the legislative part of its work of grouping together all of the taxes directly or indirectly affecting products, services or transactions, and taxes controlled or recovered under the same procedures and regimes relating to such goods, services or transactions in a single code.
Once the regulatory part has been completed, it will mark the end of this project that began in 2020.
This updated version of the VAT legislation will enter into force on 1 September 2026.
In the meantime, practitioners will have to get familiar with a new corpus which, it must be said, is confusing to say the least.
We have been able to publish this first commentary after being offered by the Tax authorities the opportunity to carry out a critical and constructive reading of the text, in a personal capacity, during the drafting phase.
We are aware of and honoured by the trust placed in us by the Directorate of Tax Legislation (“DLF”) and we can only praise the quality and the great freedom of the technical exchanges we had with our contacts, who will not be surprised by our guarded and cautious remarks.
Changes imposed for the overall consistency of the new code
As required by modern codification standards, the new codification has resulted in the renumbering of all the provisions. In principle, this makes it possible to find an article in the organisation of the code, its books, titles, chapters and other subdivisions, which the French General tax code (CGI) had not achieved as yet.
The articles have also been shortened and are therefore more numerous despite the fact that certain provisions have been removed.
In principle, each subdivision begins with articles that set out definitions and principles followed by specific variations and exceptions; other than those that correspond to a regime specific to a particular sector or flows, which are the subject of a separate subdivision.
To respect the architecture of the other books that make up the CIBS, Book II follows a different organisation from the section of the CGI that was until now dedicated to VAT, which itself complied with the drafting of Directive 2006/112/EC of 28 November 2006, which it transposed into French law.
Many provisions have been reclassified in the law (e.g. the methods for determining rights to deductions), others are not included in the law or will now fall within the scope of regulations or even Tax authorities guidelines. In some cases, their very existence has been deemed unnecessary on the ground, for example, that the particular rule they have so far enunciated can in fact be deduced from more general rules.
In addition to these foreseeable changes, the authors have made some far-reaching choices for the organisation of VAT operating rules that it is useful to keep in mind for any research in this new book. In particular, it should be noted that:
- On the ground that the right to deduct VAT is an integral part of the assessment of the tax, its rules are spread across almost all the chapters of Title I “General scheme”, in the same way as those relating to the determination of the tax applicable to transactions: provisions relating to the right to deduct can thus be found in the provisions on the scope of application (Chapter I), the chargeable event (Chapter II), the amount (Chapter III), the chargeability (Chapter IV) and the recording (Chapter VI) of the tax, to which are added a few provisions specific to certain schemes (especially in the chapter dedicated to real estate and real estate works); in our opinion, this method could be challenged and creates unnecessary complexity. VAT is fundamentally different from the other taxes on goods and services referred to in the CIBS because of the existence and mechanism of the right to deduct. Its inclusion in the CIBS did not, in our view, require splitting each aspect of the right to deduct in order to fit it into the same headings as those chosen for the other taxes. A specific heading covering the whole system of deductions would have been entirely justified by the intrinsically unique nature of VAT. Moreover, this division of the provisions relating to the right to deduct makes them difficult to read or comprehend in their entirety, even though, according to the established terms, the right to deduct constitutes the ‘cornerstone’ of the VAT system.
- Whereas, in the VAT Directive, exempt transactions can only be deducted on an exceptional basis, the drafters have reversed this principle in order to better reflect the scope of the principle of neutrality, which the right to deduct is the translation of: only transactions subject to what is now designated as a “derogating” exemption are excluded from the right to deduct the tax upstream (activity of general interest, financial activities, etc.), others, called “functional” are entitled to be deducted;
- The territoriality rules, which have hitherto been limited to determining which transactions are taxable within the national territory and which are not, have been enriched by the transposition of certain provisions of the VAT Directive, which, without having the effect of drawing a transaction into the national territorial scope of taxation, may have an impact on some of the obligations by which economic operators are bound in France.
Systematic integration of Court of Justice of the European Union case law
Practitioners are aware that the proper application of VAT rules requires extensive knowledge of the vast jurisprudence of the Court of Justice of the European Union (ECJ), which, in the course of its interpretive work over half a century, has clarified the concepts arising from the VAT Directive, addressed some of its vagaries and promoted the harmonisation of the procedures for the application of VAT by the EU Member States.
Council Implementing Regulation (EU) No. 282/2011 that sets out implementing measures for the VAT Directive has, of course, incorporated some of these clarifications from case-law, in particular as regards the rules on territoriality, but there are still a certain number, which are necessary for the correct application of this tax, that are solely addressed by case law.
It should first be noted, with regret, that the CIBS does not transpose the entirety of this regulation in its Book II.
However, and while the enabling text had assigned to the re-codification, among other objectives, that it should adapt the provisions of French domestic law to that of the EU, the drafters of the new legislation took the initiative of undertaking a massive and systematic integration of this jurisprudence into the law (with the exception only of that which has been deemed not yet sufficiently established or too specific to a particular situation). In our opinion, this is the most spectacular, the most scientific but also probably the most delicate and questionable part of the work carried out.
In this regard, one can of course only welcome the fact that purely jurisprudential concepts such as the "direct link" and its articulation with the concept of "overhead costs" are incorporated into the statute, along with a definition of transactions that are “closely related” to an activity of general interest, and many other concepts and definitions.
This work certainly aims to give users better legal certainty while exempting non-professionals from having to supplement their reading of the law with studying abundant and often esoteric case law. However, it is far from certain, in view of the outcome, that it will make VAT rules more legible for the common man.
Lawyers such as ourselves have a clear preference for working with raw materials rather than consuming prepared dishes intended for immediate consumption (as the so-called category of goods identified by the French tax Law for the purpose of VAT rates).
For practitioners, it will sometimes take a long time to recognise the provision of the current Tax code (CGI) or the VAT Directive that have been enriched or even revisited by case law in a CIBS article (which can be identified thanks to the correspondence tables). This work will be even more important for those who wish (or are even obliged) to ensure that the new wording corresponds exactly to the application of the provisions of the Directive transposed into domestic law and clarified by case law. The redistribution of all or part of the different parts of what is currently a single article between several articles in different sections of the new corpus will sometimes make reading even more difficult.
The approach adopted by the drafters also results in an important change of vocabulary, which is on occasion inspired by case law, or sometimes by a desire for consistency with that used in the other parts of the new code and, in some cases, without any clear reason.
Could difficulties that go beyond the mere cost of change emerge?
We hope that we are wrong in announcing that it will take some time for practitioners (experts in law and figures, tax authority officials and judges) to adapt and that this will be complicated by the time it will take for the Tax authorities to publish the regulatory part and carry out a complete renovation of its published guidelines (Official Bulletin of Public Finances-Taxes – BOFIP); these elements are nevertheless indispensable to the edifice since, as has been said, the ordinance gives rise to some reclassifications but also many declassifications from regulation/guidelines to Law and vice versa.
The Tax authorities have already announced that they will take measures to ensure legal certainty for economic operators from the entry into force of this part of the CIBS. However, it will still be necessary, during an undoubtedly long transitional period, to juggle in some way between new sources and those that are on their way out.
Beyond this work of adaptation, the conceptual choices made for this re-codification, in particular the reorganisation of the drafting and the massive integration of the case law of the CJEU, seem to us to lead concretely and paradoxically to moving French law away from the VAT Directive it transposes.
This observation promises to open up beautiful debates on the advisability or legitimacy of proceeding with such an upheaval in the context of a re-codification exercise.
We will limit ourselves to the following questions to launch the debates:
- Does the adoption of an unintuitive organisation and the at times complex drafting of the articles not undermine the legibility of the VAT system and therefore access to the law?
- Is the implementation of new directives amending the reference VAT directive likely to be more complicated than it already is by requiring a conversion of the common “source" language used by the EU legislator into that used in French law?
- Will the legislator stick to the “updating” of domestic law that will now be obliged to align with European case law?
- Is there not a risk that it is likely to prove more complicated for tax judges to ensure that domestic law complies with European law?
Everyone will form their own opinion and for the rest, only the future will tell.
