In a letter to the president of MEDEF on 2 April 2020, the Director General of the French tax authorities (DGFiP) announced two exceptional measures for companies experiencing significant difficulties in establishing their declaration and for those facing a fall in their turnover due to the Covid-19 crisis.
He emphasised, however, that in relation to VAT, companies are in principle required to respect their declaration and payment deadlines throughout the health crisis and that justification for invoking either of the two exceptional measures will be subject to subsequent inspection.
Companies experiencing difficulties establishing declarations
The letter makes implementation of this tolerance measure dependent on the existence of significant difficulties accurately establishing the declaration and making the corresponding payment due to an inability to collect all the relevant documents during lockdown, without any condition relating to a fall in turnover.
In the current situation, VAT due for the month in question can be declared and paid based on a simple estimate, as is normally the case during a holiday period. The authorities emphasise, however, that the amount paid cannot be more than 20% lower than that actually due. It can be estimated at 80% of the VAT due for the previous month.
The letter does not mention the possibility of repeating this option for several consecutive months, so it should therefore be considered as only applying to one month.
Companies facing a fall in turnover due to the Covid-19 crisis
Depending on the scale of the estimated decline, the companies in question may declare and make a downpayment in April, in relation to March figures, equal to:
- 50% of the amount due for February (or January if the company previously estimated the tax due for February) if the business stopped operating (closed) from mid-March or the decline in turnover is estimated at a minimum of 50%. The authorities do not indicate the reference period;
- 80% of the amount due for February (or January if the company previously estimated the tax due for February) for other companies whose turnover has fallen, but to a lesser extent.
The downpayment must be entered in line “5B” of declaration CA3 and use of the exceptional measure must be indicated in the notes (“mention expresse”) section, specifying “Covid-19 downpayment” as well as a brief indication of the flat-rate used (e.g. “flat-rate 80% of month”).
According to indications given by the authorities, this exceptional measure may only be used for a second time in April if “the lockdown period is extended making it impossible to make a payment declaration by that date".
It would appear from the examples provided in the letter that the two measures may be used successively, i.e. a company could apply the tolerance granted in the event of significant difficulties establishing the declaration in relation to February figures in March, and then the tolerance granted to companies facing a fall in turnover for the declaration made in April in relation to March figures.
Adjustments
Unless the lockdown period is extended, the adjustments must be applied in May in the declaration submitted for April figures. The adjustment declaration must include the total actual figures for April as well as the previous month(s) for which the tax declaration was made in the form of a downpayment (March and February, where applicable). The total amount of downpayments made for the previous months should be entered on line “2C” in the “Deductible VAT” section.
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