As of January 1st, 2018, the mandatory use of bookkeeping program/ accounting application or certified and secured cash-based system is foresee by French Finance Law . This will concern all payments received through different methods such as the bookkeeping program or a certified and secured cash-based system. Certification from a licensed body or an individual declaration from the editor is required. Basically, a software or cash register system is a computerised system in which a taxable person records deliveries of goods and services, regarding which they are not obliged to issue a VAT invoice, i.e. it records transactions with non-taxable customers (B2C). Concerning multi-function software (accounting / management / cash), only cash functions register (not the entire software), must be certified.
Thus, the software or cash register systems in which only transactions with taxable person are recorded (B2B transactions) fall outside the scope.
Those systems, in which both B2B and B2C transactions are recorded, fall under the scope of the new regulation.
On the 3rd of August, the French Tax authority (called the “FTA”), commented on the conditions of application concerning the implementation of the anti-fraud strategy (BOI-TVA-DECLA-30-10-30 – BOI-CF-INF-20-10-20).
To that extent, the FTA had specified the application scope of the new measure with compliance standards which software and cash-based system must fulfil. Means of justifying the compliance with the obligation and a specific supervising procedure are also detailed:
A broad application scope
In accordance with Article 286, I-30 bis of the FTC, the obligation of using secured software concerns all VAT taxpayers who record their customers’ regulations using accounting software or a cash register system.
Certification and compliance standards required by the new regime:
Effective as of January 1st, 2018, software specialized in bookkeeping, management, and cash-based system must guarantee various conditions, such as inalterability, security, conservation, storage of data, certified either by a licensed body or an individual declaration issued by the editor.
Once the taxpayer develops the application or relevant system required, a declaration must be filled from a licensed body.
If the taxpayer already owns cash-based systems and / or software needed for the accounting or management, a certificate or declaration of each products must be provided.
Penalties involved and monitoring / supervision right of the FTA
Control of declaration or certificate can be undertaken either through a new unannounced check procedure (Article L 80 O of the FTC) or an ordinary accounting verification.
For the lack of attest a fine estimated at 7 500 € per software or non-certified system will apply.
In case of an unannounced investigation, the FTA cannot investigate bookkeeping procedure of the company. The monitoring process is then restricted to a simple documentary check, and no proof of fraudulent use of the software is required from the FTA.
However, fraudulent functionalities, mapped out through a subsequent investigation introduced by an accounting verification, shall imply tax reassessments aiming at coping with any situations of artificial reduction or concealment of incomes. This shall be applied in addition to others eventual penalties reaching at 80% of the tax basis if tax scam is revealed (Article 1729 of the FTC).
For it’s part, the editor of the software will be also liable to penalty equal to 15% of the turnover (Article 1770 undecies of the FTC).
Furthermore, a proof of fraudulent use of the software invalids the declaration and/or certificate. Besides, penalties shall be applied to taxpayers in addition to those mentioned above (penalty of forgery and falsification of records plus a fine of 7 500 €).
The first measures of compliance to adopt as soon as possible
Taxpayers within the scope of this legislation must take measures to introduce the certification process.
I recommend that you contact your editor and legal department to establish an overview of the scope, flows and functionalities included in the measure. It is required to determine, in a short time, the issuance of the certification process.
In case of less complex cases, in which standard configurations of the ERP do not require any improvement or substantial changes, taxpayers could comply with the new requirement of the current maintenance contract by following a simple updating of their ERP.
Nevertheless, if multiple software (internal, standard, interface units) meet different functionality standards, the preparation of a compliance would be more complex. To that extent, it can be required a reshaping of the rules of parametric functionalities of each “applicative” involved.
In case of the most complex schemes, the editor could merely refuse to issue a certification if additive and changes of substantial settings of configuration are different from the original software.
To sum up the above, the new measure concerns:
- Only B2C transactions (exclusion of any B2B flows)
- Any transactions for which the VAT invoicing obligations are not compulsory.
As mentioned above, the penalty is EUR 7’500 per units used, which can reach a significant amount in case you have many units in France. Therefore, I highly recommend to evaluate whether you fall under the scope of the new regulation and naturally, we are happy to assist you in this process.
Please feel free to contact Patricia More on +41 58 792 9507 or firstname.lastname@example.org.
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